Low Resistance Liquidity Runs (AVOID BAD PRICE ACTION)

Low Resistance Liquidity Runs Explained

Introduction to Low Resistance Liquidity Runs

• The lecture focuses on low resistance liquidity runs (LRLR), crucial for understanding market behavior through algorithmic price delivery.

• LRLR are characterized by aggressive and sudden market movements, ideal for traders as they allow immediate expansion from entry points.

Defining Low Resistance Liquidity Runs

• A low resistance liquidity run is defined as a swift movement between key levels with minimal retracement, indicating quick market shifts.

• Visual representation shows the market dropping into a discount level, forming lows, and then expanding upwards with minor retracements before reaching opposing key levels.

Characteristics of High Resistance Liquidity Runs

• In contrast, high resistance liquidity runs (HRLR) involve significant back-and-forth movement before any expansion occurs.

• Recognizing HRLR helps avoid poor trading setups; these environments show consolidation and struggle to break through price levels.

Importance of Anticipating Market Movements

• Understanding the difference between LRLR and HRLR allows traders to identify potential trade setups with higher probabilities of success.

• Economic calendars can help anticipate when low or high resistance liquidity runs may occur, enhancing trading strategies.

Practical Application in Trading

• The economic calendar serves as a tool for predicting market behavior; however, pure market analysis can also indicate potential LRLR opportunities.

Understanding Market Dynamics and Price Displacement

Analyzing Price Action and Support Levels

• The speaker emphasizes the importance of observing price displacement above a specific range to identify signs of strength in the market, which can indicate potential upward movement.

• A review of previous analysis shared with mentorship students highlights the significance of certain price ranges in understanding market behavior and trends.

• The discussion illustrates how the market forms highs and lows, noting that a new high being lower than a previous one indicates weakness, leading to further downward movement.

• The old low serves as a crucial reference point; if resistance is found there, it suggests that prices may continue to decline.

• Once price displaces above the old low, it is anticipated to act as support, indicating potential for upward momentum.

Visual Representation and Analysis Confirmation

• The speaker acknowledges potential confusion but aims to clarify concepts through visual aids that demonstrate market dynamics effectively.

• Displacement above the previous low (marked by a red box) is expected to function as support, facilitating further upward movement characterized as a low-resistance equity run.

• Observations from Tuesday's analysis confirm that forming a low on Tuesday is favorable; confirmation comes from displacing above key levels established earlier in the week.

Importance of Multi-Time Frame Analysis

• Utilizing multiple time frames enhances analysis accuracy, allowing traders to gauge whether continuation higher will occur based on observed patterns.

• Insights into past week's performance are shared, focusing on identifying high-probability trading setups for upcoming days based on prior movements.

Key Price Ranges and Market Behavior

• Specific attention is drawn to a narrow price range defined by candle highs and lows; this range was monitored closely throughout the week for signs of bullish or bearish activity.

• As long as prices remain below this critical range, neutrality prevails; however, displacement above it would signal bullish sentiment.

Analyzing Recent Market Movements

• A recap of recent market actions shows an aggressive upside move followed by retracement; significant focus is placed on understanding these fluctuations within context.

• Attention shifts to down candles identified as bearish mitigation blocks due to their formation following specific high-low sequences in price action.

• The significance of imbalances created during these movements is discussed; they serve as pivotal points for determining future support or resistance levels.

Market Dynamics and Displacement Analysis

Understanding Displacement in Market Movements

• The speaker emphasizes that mere price wicks are insufficient for a bullish outlook; true displacement is characterized by speed and velocity in market movements.

• A rejection of a specific price range leads to downward expansion, forming a low on Wednesday, followed by market consolidation without significant delivery.

• During the Asia session, a buy program initiates, causing the market to form lows before running higher, indicating respect for previous price ranges.

Signs of Bullish Order Flow

• The market shows signs of displacement with a notable up-close candle, signaling strong bullish order flow.

• A bullish candle (BC) aligns with previously established price ranges, demonstrating predictive accuracy in market behavior outlined days prior.

• Support is found within this price range as the market trades away from it; however, subsequent movements indicate engineering buy equity above equal highs.

Market Maker Buy Models

• The discussion highlights how multiple market maker buy models unfold from specific price levels, showcasing algorithmic precision in trading strategies.

• The unfolding of these models indicates numerous opportunities available at precise price ranges rather than random buying or selling pressure.

Anticipating Market Reversals

• The speaker reflects on potential high reversals and warns against capturing highs without proper confirmation signals from the market.

• Key levels are identified for potential sell targets below Tuesday's low if certain conditions are met during upward expansions.

Analyzing Price Action and Imbalances

• As the market expands upwards and forms new highs, any subsequent displacement through imbalances can signal weakness in retracement efforts.

• If imbalances act as resistance during downward movement, it suggests an aggressive shift towards lower prices due to underlying weakness.

Algorithmic Signatures and Bearish Formations

• Identification of bearish breaker formations provides insight into potential future movements based on past performance patterns observed throughout the week.

• Emphasis is placed on specific key levels where resistance should be expected if displacements occur through those areas.

Understanding Low Resistance Runs in Market Dynamics

Market Behavior and Price Rejection

• The candle opens with a buy offer but quickly rejects the price range, leading to aggressive downward movement that takes out the JUA low. A sell order rests below this low before the market eventually closes higher.

• The next early candle also opens with a buy offer but immediately shifts to selling, illustrating a typical low resistance run characterized by minimal retracements and heavy market conditions.

Importance of Historical Context

• The left side of the curve is crucial for setting up future price movements on the right side. This relationship is essential for understanding market dynamics.

• Past price actions influence future outcomes; recognizing time and price sequences helps anticipate market behavior. Observations from Thursday's trading indicate low resistance towards downside movement into weekly openings.

Animation Insights on Market Structure

• An animation illustrates how markets form highs and lows, demonstrating retracement patterns that set up new runs higher or lower. Understanding these patterns is vital for predicting future movements.

• Monitoring bearish breakers can reveal potential support levels as prices move above them, contrary to common misconceptions about their relevance after being breached.

Patience in Learning Market Dynamics

• Emphasis on patience in learning; valuable insights are often shared at the end of lectures to filter out less dedicated viewers. Commitment to understanding complex concepts is necessary for mastery.

Mechanisms Behind Low Resistance Runs

• The significance of extending bearish breaker ranges on charts lies in their potential function as support when bullish orders are present.

• Low resistance runs occur when there are no intervening levels between current prices and target equity, prompting rapid repricing by the market due to lack of obstacles.

• Objective entries during these runs lead to significant price movements (big green or red candles), highlighting where speed and volume injections typically happen.