Price action as moving from a liquidity zone to another and testing/re-testing of price reaction are

[smcoder]

In the last few days I've been trying to build an understanding of this behavior that can commonly be seen on financial markets of price retests and have stumbled on a few, I must say, interesting videos of a trader that describes his approach to price action reading that can be summed up in the fact that price often moves between previous price reaction areas/levels and either the move gets rejected (support/resistance remains valid) or breaks through. Indeed, looking at what a tool like Bookmap shows, price often seems to be attracted by liquidity zones (area where take profit/stop/entry orders are sitting).

What I keep not understanding is how and why this is occurring and who/what is causing this behavior (market makers? professional traders?). I understand that for price to move in any direction you need both buyers and sellers (I was reading an interesting article by Ed Yardeni that on a larger scale says 'We Need More Bears To Keep The Bull Market Going' but I suppose this is just as true also on a daily micro scale for a specific financial instrument) so to have price move in any direction price probably needs to jump like a flipper ball from liquidity zone to liquidity zone.

Or is hitting of liquidity zones something that larger traders cause to allow entering/existing markets and at the same time limit the consequent impact on price?

But on the other hand isn't going against resistance/support areas contradicting the idea that price should travel the road of least resistance?

 

[wxytrader]

In the last few days I've been trying to build an understanding of this behavior that can commonly be seen on financial markets of price retests and have stumbled on a few, I must say, interesting videos of a trader that describes his approach to price action reading that can be summed up in the fact that price often moves between previous price reaction areas/levels and either the move gets rejected (support/resistance remains valid) or breaks through. Indeed, looking at what a tool like Bookmap shows, price often seems to be attracted by liquidity zones (area where take profit/stop/entry orders are sitting).

What I keep not understanding is how and why this is occurring and who/what is causing this behavior (market makers? professional traders?). I understand that for price to move in any direction you need both buyers and sellers (I was reading an interesting article by Ed Yardeni that on a larger scale says 'We Need More Bears To Keep The Bull Market Going' but I suppose this is just as true also on a daily micro scale for a specific financial instrument) so to have price move in any direction price probably needs to jump like a flipper ball from liquidity zone to liquidity zone.

Or is hitting of liquidity zones something that larger traders cause to allow entering/existing markets and at the same time limit the consequent impact on price?

But on the other hand isn't going against resistance/support areas contradicting the idea that price should travel the road of least resistance?

There's no such thing as liquidity zones or support and resistance.

'We Need More Bears To Keep The Bull Market"

I said that putting stops basically just facilitates big money getting sized into positions...they don't protect you from losses...they guarantee them.

I don't know why the talking heads get all the praise when they just regurgitate what others have already said.

 

[SunTrader]

Stops hit moves price.

 

[smcoder]

Stops hit moves price.

aha, now everything is clear

 

[maxinger]

In the last few days I've been trying to build an understanding of this behavior that can commonly be seen on financial markets of price retests and have stumbled on a few, I must say, interesting videos of a trader that describes his approach to price action reading that can be summed up in the fact that price often moves between previous price reaction areas/levels and either the move gets rejected (support/resistance remains valid) or breaks through. Indeed, looking at what a tool like Bookmap shows, price often seems to be attracted by liquidity zones (area where take profit/stop/entry orders are sitting).

What I keep not understanding is how and why this is occurring and who/what is causing this behavior (market makers? professional traders?). I understand that for price to move in any direction you need both buyers and sellers (I was reading an interesting article by Ed Yardeni that on a larger scale says 'We Need More Bears To Keep The Bull Market Going' but I suppose this is just as true also on a daily micro scale for a specific financial instrument) so to have price move in any direction price probably needs to jump like a flipper ball from liquidity zone to liquidity zone.

Or is hitting of liquidity zones something that larger traders cause to allow entering/existing markets and at the same time limit the consequent impact on price?

But on the other hand isn't going against resistance/support areas contradicting the idea that price should travel the road of least resistance?

My goodness.

You will turn bald in a few days if you analyse the movement in such a complex way.

Just need to know the. Market moves in various manner fashion speed personality characteristics


Sometimes it moves decisively and nicely.

Sometimes it moves chaotically messily jerkily

Sometimes it doesn't move

 

[smcoder]

@maxinger I don't see anything special in my attempt to understand the what, why and who of this behavior. Once you have a model for what you see, it is easier to interpret everything else.

 

[dominover]

In the last few days I've been trying to build an understanding of this behavior that can commonly be seen on financial markets of price retests and have stumbled on a few, I must say, interesting videos of a trader that describes his approach to price action reading that can be summed up in the fact that price often moves between previous price reaction areas/levels and either the move gets rejected (support/resistance remains valid) or breaks through. Indeed, looking at what a tool like Bookmap shows, price often seems to be attracted by liquidity zones (area where take profit/stop/entry orders are sitting).

What I keep not understanding is how and why this is occurring and who/what is causing this behavior (market makers? professional traders?). I understand that for price to move in any direction you need both buyers and sellers (I was reading an interesting article by Ed Yardeni that on a larger scale says 'We Need More Bears To Keep The Bull Market Going' but I suppose this is just as true also on a daily micro scale for a specific financial instrument) so to have price move in any direction price probably needs to jump like a flipper ball from liquidity zone to liquidity zone.

Or is hitting of liquidity zones something that larger traders cause to allow entering/existing markets and at the same time limit the consequent impact on price?

But on the other hand isn't going against resistance/support areas contradicting the idea that price should travel the road of least resistance?

I believe the concept you are referring to value areas. Value areas are levels for Rangers in the market where buyers and sellers have come to a temporary agreement in the price. From there you get ranging. They can often just be identified using a volume profile indicator, market profile indicators. Really you can see where the consolidation happens.

I would agree that all the market is made up of is movement between these areas. I suppose at the end of the day you are asking when does it move from these areas. The break and retest method doesn't always give a reliable indication unless it's a companied by higher volume moves, and it's more likely that it will move on good news to a higher value area. My own observation and I'm sure the observation of others is that it takes really good news or it takes a big market move to move it between value areas.

There is a book on the market called the 'price action breakdown' where the author addresses this very concept. In relation to these value areas it has certainly helped me make decisions about where to buy if a market is ranging. I have asked questions on this forum recently asking about border blocks add liquidity zones. I felt using the two concepts together is far more powerful than just one alone. Order blocks liquidity zones and value areas.