BACKTESTING EDUCATION | How the market behaves
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The market ALWAYS looks for liquidity and is magnetized by it. That is why there is a manipulation of trendlines , then bounces at the consolidations POC (Point Of Control) levels where it finds liquidity.<
Imbalance is where price has shown very little volume , and you can expect liquidity to be sitting there because price has not had a chance to trade at that level.
RSI divergence is where the strength of the market is going one way, and price is going the other way.
In this case, price was forming higher highs and the RSI (strength index) was showing lower highs; so it's a divergence from the strength of the market and what the price is telling us.
A Spring is when price is preparing for an aggressive move by multiple means: either by manipulating levels, retesting an accumulation or distribution; But in most cases, it's creating fear in one side in order to push price in the opposite way.
For example, the distribution on the top right shows euphoria because everyone is buying for a breakout of the longer-term trendline. Therefore, because everyone is only thinking that the market will go up, the complete opposite actually happens. This takes out a lot of people, and in the meantime takes their liquidity (their stop losses).
Fibonacci is a retracement tool to determine the most optimal level where the price is likely to continue its trend based on the length of an initial aggression move.
Imbalance is where price has shown very little volume , and you can expect liquidity to be sitting there because price has not had a chance to trade at that level.
RSI divergence is where the strength of the market is going one way, and price is going the other way.
In this case, price was forming higher highs and the RSI (strength index) was showing lower highs; so it's a divergence from the strength of the market and what the price is telling us.
A Spring is when price is preparing for an aggressive move by multiple means: either by manipulating levels, retesting an accumulation or distribution; But in most cases, it's creating fear in one side in order to push price in the opposite way.
For example, the distribution on the top right shows euphoria because everyone is buying for a breakout of the longer-term trendline. Therefore, because everyone is only thinking that the market will go up, the complete opposite actually happens. This takes out a lot of people, and in the meantime takes their liquidity (their stop losses).
Fibonacci is a retracement tool to determine the most optimal level where the price is likely to continue its trend based on the length of an initial aggression move.
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Here is a better view at the trendline and resistance level that got manipulated timeframe:
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