Liquidity voids have quickly become trendy among several trading circles, but how exactly do they work? Discover the revolutionary secret in this article today!
Table of Contents
1. Introduction
Liquidity voids have quickly become trendy among several trading circles owing to the gaps’ purported forecast accuracy. Traders, experienced and novice, champion, question, or criticize the concept heavily, but how exactly does it work?
Keep reading this concise article to learn about this novel theory and how it can help the most amateur traders. There’s also a lesser-known innovation based on its fundamentals highly recommended for instant positive impact.
2. Understanding Liquidity Voids
Liquidity voids are chart areas where the market only delivers price on one side (bullish or bearish). In other words, they are zones (above or below the current price) with a former strong market run upward or downward.
Below are examples of such:
Superficially, these gaps don’t connote much, especially from a classic fundamental or technical standpoint. They only prove periods with seemingly increased market participation.
Other times, such voids only result from news releases, economic reports, or other significant market drivers.
In contrast, recent studies confirm their significance as zones where prices will likely retest. Proponents of this believe the market seeks “balance” or “wholeness” by returning to these chart areas with large-body candlesticks.
Hence, advocates also term these gaps “price imbalances.”
Prices will likely gravitate towards the most recent price imbalances to equalize the market.
Some traders take the theory further by forecasting the ensuing reaction.
3. Salient Facts About Liquidity Voids
Admittedly, these voids have always been present despite being regarded only lately. Prices significantly move in one direction from time to time. Hence, it’s a blessing to discover how to exploit it.
That said, forecasting and trading profitably with price imbalances isn’t always white and black, especially for newbies. Take note of the following caveats:
3.1 Liquidity Voids Are Present in Different Timeframes
The presence of a price imbalance in every timeframe means interested traders must continually monitor the general market for better results.
Seemingly inexplicable price moves on an M15 chart may be heading for an H1 liquidity gap. Similarly, the market may seek to balance an M1 gap, oblivious to a typical swing trader.
3.2 They Can Fill at Any Time
A well-defined price imbalance can rebalance in a few minutes or several months. There is no time limit, regardless of the trading conditions before, during, or after its formation.
Hence, experts advise identifying these areas above and below the current market price. There’ll always be a target whether the conditions turn bullish or bearish.
3.3 Voids May Not Completely Close
Contrary to beliefs, prices don’t fill price imbalances completely on every attempted run. Traders that subscribe to the concept aim for 50 percent of the gap and are open to different possibilities afterward.
The market can reverse at any time while rebalancing and return much later for completion.
Such an awareness helps amateurs manage risk better, which is paramount for success.
3.4 Attempts To Close Price Imbalances Are Not Sudden
Price movements towards these gaps are hardly direct, primarily when no high-impact events stimulate them. Market gyrations will provide scalping and day-trading opportunities in both directions.
Trading with this in mind saves most from unpleasant surprises detrimental to one’s goals.
3.5 Subsequent Moves Are Independent of the Theory
As discussed, the traditional liquidity gap principle ends when the market price finally fills a target zone. Traders may turn to other strategies for new opportunities.
Some advanced chartists claim to understand the next probable move after the rebalance, but others still consider such expectations subjective.
4. Boosting Trade Results With the Smart Liquidity Void for TradingView
The concept of a price imbalance may be the least exciting on paper. However, several trading mentors have enjoyed enviable success with them.
If it still seems daunting despite several trials, consider the highly recommended Smart Liquidity Void for TradingView. It is a ground-breaking technical system that accurately forecasts price continuations and reversals from price imbalances.
Precisely, below are only a few of the advantages users relish:
- Awareness of the most significant liquidity voids around the current price
- Certainty of prices’ next move after filling a void (reversal or continual)
- Freedom to move across different timeframes for improved analysis
- Assurance of taking every opportunity, credit to the prompt alerts from within and outside the trading platform
Sounds made-up? Confirm these and many more unbelievable features by clicking here today.
5. Final Thoughts
Liquidity voids are receiving well-deserved attention thanks to their proven ability to improve forecasts.
They are zones where prices move strongly in one direction. Hence, experts expect the market to gravitate towards such areas for a rebalance.
The Smart Liquidity Void for TradingView is highly recommended for this principle, as it correctly predicts price movements before, during, and after filling the gaps.
Please share your experiences with these gaps and other strategies in the Comment Section. Also, promote this article among friends, family, and other trading enthusiasts.
