Trading sessions liquidity hunt

2023年10月21日

Liquidity serves as the driving force behind all markets. The fundamental driver of any price shift involves the creation and aggregation of liquidity, with the objective of accumulating or distributing positions among market participants.

Accumulating positions necessitates counter liquidity to fulfill orders and initiate positions in the desired volume. Liquidity is therefore established within specific price ranges, with the intention of later manipulating it toward the accumulation of counter liquidity, ultimately achieving the goals of order fulfillment.

The bulk of liquidity, including stop orders and liquidations, tends to congregate around technical and psychological support/resistance levels, which can be observed retrospectively through the analysis of clusters and volume profiles.

Engaging in trading based on a one-time reaction, characterized by a substantial cluster forming during the breach of a particular price level, can lead to premature entry and potential losses, driven by inaccurate expectations of either a price breakthrough or deviation from calculated reference points

1. - An approach that leans towards caution, involving the selection of a trading setup once liquidity has been obtained from the previous trading session's highs/lows within the prevailing trend. This process is carried out while ensuring alignment between higher and lower timeframes.
   
2. - The primary objective is capital preservation, which is accomplished by minimizing risk to the range of 0.5-1% per trade and adjusting open positions to the break-even point after confirming the trend's structure.
   
3. - The strategy opts for an entry technique that boasts a high mathematical expectation of success.
   
4. - Fresh positions are initiated exclusively during periods of elevated market volatility, particularly during the optimal trade time (OTT) sessions in London and New York.
   
5. The focus is directed towards trading setups featuring risk:reward ratios ranging from 1:3 to 1:10.
   

Given the dynamics of market participants accumulating and distributing their positions during trading sessions, it's reasonable to assert that liquidity forms outside the fluctuations of these sessions. This liquidity is typified by stop orders and position liquidation within the scope of a micro-trend.

Consequently, it can be inferred that the commencement of the subsequent session will involve manipulation. The aim of this manipulation is to interact with such liquidity to amass positions in the opposite direction. Coupled with heightened volatility during the session's commencement, this provides opportunities to initiate positions before the impending price movement.

The primary criterion for entering a position will be the disruption of the existing structure following the capture of liquidity. Additional factors might encompass corrective momentum, liquidity in the opposing direction acting as an attraction for distributing accumulated positions during manipulation, and the formation of trading ranges with deviations, among others.

Entry into a position occurs on a lower time frame, emanating from an untested supply/demand zone. An additional aspect to consider is the presence of local liquidity before reaching the entry point.