Posted by: joetradingplace | June 2, 2012

Liquidity Gaps and Spike Removals

I always talk about liquidity gaps, Steve wrote a very good article on that subject:

Author: Steve W , http://www.nobrainertrades.com/, https://twitter.com/#!/nobrainertrades

Video notes:

Liquidity gaps can be very valuable in both dissecting price and distinguishing major reversal points or price targets.

When using as a meter to take profits, do so when gap risk becomes considerably lower, at the base or origin or the spike.

Trade in line with the prevailing, underlying trend.

Use as a guide of knowing when to stay out, or be patient for better risk / reward.

Know how to identify the four major types of gaps, which ones fill and which ones don’t.

Don’t “fudge” the setup.  If things don’t line up or are ambiguous, this is probably the case to everyone else.

Applicable to all time frames; concept is still very much the same.

Learning and successful application are two very different things.  Filling the gap between them takes time based on your own effort, diligence, sensibilities, etc.

 
 http://www.youtube.com/watch?v=-8Qf0BwKbUs

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