Why does price have an inclination to move to low volume nodes

November 10th, 2018, 07:51 PM

And fill them out over time? Especially if they were zero for only one side of ask/bid

November 10th, 2018, 09:42 PM

Here's one kind of answer based on market auction concepts.
Price is always looking for value.
Things change, the collective idea of where value is is always changing.
So price tests old areas of value and the edges of current and previous value areas ( LVN's) to see if there is current value there.
If there is no market agreement of value at a location then price does't stay there long, and the LVN is confirmed.
Price then moves away and seeks value higher or lower from there.

November 11th, 2018, 11:16 AM

I think this is a good question. I wrestled with this for a long time and my personal conclusion in three words is 'potential unrealized liquidity.'
I'll explain:
LVNs are usually highly correlated to swing levels.
What is a swing level to market participants? It is a decision point - a place to exit a trade or enter a trade. So immediately you know that potential liquidity exists because when the market tests this level, some decision makers will want out and some decision makers will want in.

So let's say The market breaks through a level. What you now have is a bunch of trapped traders who will be holding onto their positions hoping that they can at least get out at breakeven. You also have another bunch of traders whos bias has been confirmed and are now waiting for a pullback to the breakout point so that they can join the move.

This is liquidity that you will not see printed on your chart (yet) but if you understand the general psychology of market participants then it is quite obvious. It is a phenomenon that repeats and the best reasoning I can come up with. I could be more detailed with the explanation but then the opinion gets boring.

Why does price have an inclination to move to low volume nodes

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Why does price have an inclination to move to low volume nodes