Technicals - Liquidity Voids

————-- 001 - Liquidty voids

Now we are going into same heavy details. This is where it gets interesting.

Lets dive in a little bit deeper into liquidity, especially liquidity voids.

So, when the market moves in a one-sided driven move with consecutive candles forming in that direction we call this a liquidity void.

These moves down, is usually where we notice this snowball effect, often enough taken in control by high frequency traders. HFT.

These moves are thus then a magnet, and will be hedged against to counter that move. Thus filling that 'void.'

Price will then trade inside of that range until it fills enough of that move, usually above the EQ of the consecutive candles in one direction, up/down.

This means that up until it fills that fair valuation it is still low resistance. Opposing arrays can be in place to act as areas where price might accumulate/distribute more liquidity.

Those areas could be displacements, inefficiencies, shift zones or order blocks. These may overlap as well. Begin to start noticing how price is fractal, price works in central points, equilibrium points.

No, this does not mean that at every 50% of a void you need to play a continuation. But it does mean that if it overlaps, after gaining back its fair valuation, that price is balanced. It has regained its designated purpose.

You can note how aggressive price moved down, and once it comes back it creates its fair value.

So

liquidity void = sharp one-sided run in price

Here another example where you see price coming back after the equilibrium towards stacked area, shift zone, OB and previous inefficiency.

So what is the difference between inefficiencies and displacements?

Inefficiencies are always the largest gap of the total move down, often enough they are the ones that are above the fair valuation ( EQ ) of that liquidity void.

If the move, the void, only has one gap, that will be the displacement, but if there are 2 or more, that largest will always be the inefficiency in price, as seen below.

Here one more example,

see how price reactions to both, but still ends up filling the fair valuation which you can somewhat visualize, being 50% of the entire liquidity void.

So how do we draw displacements and inefficiencies?

Very simple, its the gap between consecutive bearish/bullish candles.

- Parallel Channel

So obviously we need to be able to filter between every gap there is, otherwise it might look a little like this.

Which is still good for practice, see if you can see where each displacement comes from...

So we mainly use it to stack it as a confluence with our entries. To support our narrative rather than to blindly draw every displacement there is.

Let it breath, remember the theory behind these moves;

- One sided selling/buying is occurring at these places.

- Market is transacting/delivering in one direction, which implies other market making capable institutions that are on the wrong side will be hedging their moves as it goes against them.

- Entails fair valuation ( breakeven for the big boys) to occur during these displacements/inefficiencies.

So that concludes that we want to use these areas to support our narrative to begin moves, or to exit moves, it helps form our narrative.

Example of confluence stacking:

See how each OB we had after the BSL sweep leaves a minute little displacement, that is exactly the sign we want to see for injections within the move before we start selling.

This is what the final positioning would look like as execution. See how the entire area is respected.

So the combination of Orderblocks and Displacements are crucial.