I always buy at the tail, this is one of the core techniques I use day and night...
for me, this qualifies as a double bottom, plus bottoming tail on heavy volume.
More aggressively, I buy on the candle following the bottoming tail, after a retrace to at least 50% of the tail size.
If my strategy fails, and it does 20% to 30% of the times, then my stop is a mental stop, if the following bar closes below the tail's bottom.
Successful people will do what unsuccessful people won't or can't do!
The following 3 users say Thank You to Fadi for this post:
The event allows traders to buy at a discounted price. They buy from the risk transfer of weak hands closing their long positions. The irony of course is that they initiate or add to the selling to create the unwinding, which they are then buying from. They manipulate the market in order to profit. It is not illegal, but it is the reality. They also are buying from new initiating shorts who are selling a break below prior support. This is a game that is played every day, and it is done because it works. It is a game that can only be (relatively) guaranteed to be won by those playing with very large sums of money, because they have actual market impact. However, once their activity is seen, then piggybackers can more safely join in and benefit. This is how the market works, and it is the classical transfer of funds from one group to another. If you think in terms of traditional chart patterns, it is what happens on the last leg down of a 'bull flat' just before it breaks up. Failed break down, trap some, then cause them to drive it up with their stops. Wash, rinse, repeat. This is not theory or speculation, it is what happens.
The following 7 users say Thank You to josh for this post:
josh, if we look deeper into these 2-3 bars which are below that blue horizontal line , with higher volume -
What kind of action do you think, will be visible in Cumulative Delta or other delta type indicators / analysis ?
Can we get some clues from there, to gauge about the probabilities of price turning up from there, so that we can then take a benefit from this anticipation. " I am in no way saying that there would be an ABSOLUTE GUARANTEE that the price will definitely turn up from there, I am simply talking in the terms of measuring the probabilities somehow.
Let us assume that this "classical transfer of funds from one group to another" happened in 3 red bars which are just below that blue horizontal line. While most others were selling, "This Smart Group" was on the buying side. Now how would this thing reflect in the Delta or any other tools. Is there some way to properly quantify it, so that we can then create some Alerts etc. which will hint us about a similar opportunity being created in real time.
"Food for thought" - no one will ever find this thread again because of the way it is labeled has nothing to do with accurately describing the thread contents.
Due to time constraints, please do not PM me if your question can be resolved or answered on the forum.
Need help? 1) Stop changing things. No new indicators, charts, or methods. Be consistent with what is in front of you first. 2) Start a journal and post to it daily with the trades you made to show your strengths and weaknesses. 3) Set goals for yourself to reach daily. Make them about how you trade, not how much money you make. 4) Accept responsibility for your actions. Stop looking elsewhere to explain away poor performance. 5) Where to start as a trader? Watch this webinar and read this thread for hundreds of questions and answers. 6) Help using the forum? Watch this video to learn general tips on using the site.
If you want to support our community, become an Elite Member.
The following user says Thank You to Big Mike for this post:
Thanks Fadi, looks like a nice setup, the way you have explained it.
Do you take such trades just based on the Candle Formations alone or you pay attention to some other conditions / indicator values, as well.
And any comment regarding the frequency of such setups on your favorite instruments GC, CL, 6E, ZB.
Have you noticed this kind of phenomenon happening more often in one particular instrument, compared with others, or does it look like to be a common pattern in most of them ?
I am sorry Mike, and I agree with your statement. I just took the title as it is from the original post which was made by another trader "as I explained it in the first post." He labeled it originally as "Food for thought" in his blog post, and then later on added more details on this topic by the name of "Liquidity Pools".
I am posting the original links to both those posts now -
Nifty Nirvana: Food For Thought Nifty Nirvana: Liquidity Pools -- my comments about this futures.io (formerly BMT) Thread are given at the very bottom of this blog page in the comments section. I told him that futures.io (formerly BMT) is the best place to post such discussions, as the other forums where he posted, failed to generate any good discussion on this topic.
Please feel free to RENAME it with an appropriate name, as the OP has asked me to post it with proper editing, so the title could be easily renamed.
I am sorry for any confusion created with that title.