Avoid False Breakouts: Liquidity & Fair Value Gaps — Full Breakdown & Transcript

[00:00] setup. Where price made a high, retracted back  down, and came back to test this high again.   You watch closely as the candle slowly  starts to come to this resistance point.  

[00:13] Tons of volume starts coming in and more  and more buyers are starting to enter.   The candle is getting bigger and bigger. You wait eagerly to enter as once price   breaks this high. You expect the price  to sky rocket and make a ton of money.  

[00:27] And then suddenly it happens. You quickly go to broker and   the gains come into your account. But wait, whats happening?  

[00:39] The price is starting to slow down. Oh no, its starting to   reverse. What? It s crashing? And it turns out, you entered into   a false breakout and lost all your money. Well what if I told you, this is one the  

[00:53] most common ways traders lose money. If only there was a way to avoid these   false break outs completely and make  sure this never happens to you again.   I found a brand new technique to make sure  this never happens to you ever again.  

[01:09] And you can actually capitalize on moves  just like this one and know they are   Well to understand why this move happened  we first have to understand what caused it.  

[01:21] And the answer is liquidity. Ya see, the markets are ran based off liquidity.   In other words, liquidity is basically  fuel for the market to move.   Without liquidity, the market wouldn t move. Let me paint you a picture.  

[01:34] If you were in a long trade in this specific  example, where would you set your stop loss?   Well most traders are going to set their  stop loss right below this low probably.   As if price goes below this low you  d expect the price action to turn  

[01:47] bearish and continue to head downwards. And you aren t doing this, a majority of   the market as this exact same style of thinking. So what ends up happening, is a lot of stop loss   orders are going to be set in this area. So price is naturally going  

[02:01] to want to head towards it. And once prices breaks this low,   its going to trigger all these stop losses. But the big hedge funds and private equity   firms know this, and they use all of these stop  losses as liquidity to enter big positions.  

[02:17] So often times, price will do this break,  the big companies will enter their positions,   or in other words. Creating liquidity. The market is ran by liquidity. Once you realize  

[02:30] actually what drive price in a certain direction. So how can we make a strategy based off of   this information to make sure we can  capitalize on moves just like this one?   Well, that s why you clicked this video right? Its actually pretty simple.  

[02:44] So this is a pretty common chart setup. You will have equal highs right here.   call these points support or resistance. But actually these points of liquidity.  

[02:56] But before we get into the actual strategy. We   first have to understand another core  concept, which is fair value gaps.   A fair value gap is simply when price  moves up or down an insane amount,  

[03:11] creating an imbalance in the market. You can mark this area by simply marking   the wick before the big candle, to  the wick after the big candle.   This candle moved up so quickly that it didn t  give sellers the chance to correct this move.  

[03:27] Creating an imbalance in the market. So naturally price will want to come back   its important for the strategy. So going back to the example before.  

[03:39] Often times, if you go on a higher  timeframe like the 1 hour or daily.   There will usually be a bullish fair value gap  right below this liquidity. Somewhere right here.   And there will also be a bearish fair value  gap above these highs somewhere right here.  

[03:55] So going back to the point I made earlier. Price  will naturally want to come down to this point to   information we can work around. Price will naturally want to take   Once it hits this fair value gap it  will want to repeat the process.  

[04:09] Well you may ask. Wheres the new liquidity? The liquidity is right here at these equal highs?   So price will naturally want  to take out this liquidity.   And while doing that, price will usually move  up so fast that it will leave another fair  

[04:24] back down to this new fair value gap. Once price gets here it will naturally   want to take out more liquidity. And where else to do that other than   the highs, it made in the beginning? Price will naturally want to take out  

[04:40] these highs. Creating liquidity. And  then hit this bearish fair value gap.   It will eventually hit this bearish fair value and  then repeat this whole process to the downside.  

[05:04] Once you start thinking of the market in the terms  of liquidity and imbalances it will completely  

[05:25] t even need to look exactly like this For example. Here we have this chart. We have   Then on a higher timeframe we  have a fair value gap right here.  

[05:39] Price takes out this liquidity. Which  gives it fuel to head downwards.   While it comes down it leaves a small fvg. Price comes back up to it. Continues to fall.   Now price breaks this liquidity. And we know it has an end goal of trying  

[05:52] to get to this fvg on a higher timeframe. While doing this, it left a huge fair   fvg to test it. Then reverses back down. So now we have 2 points of liquidity left  

[06:05] and the market will continue to do this forever. One thing you should take from this video is price   will always look for two things. Liquidity and imbalances.   If you want price to go higher, you  actually need price to go lower first.  

[06:21] If you want price to go lower, you  want price to go higher first.   and share the monthly results every month so  you can see how good the analysts are doing.   And not to mention, people are  absolutely loving the signals.  

[06:34] Join the discord. I ll leave a link  in the description.