Trading Liquidity Signals
Liquidity refers to the ease with which an asset, or security, can be converted into ready cash without affecting its market price
Our Liquidity Algorithm scans the market where liquidity can be obtained and where liquidations are likely to happen. These spots are areas where liquidity flows into the market and high volume is often seen. Liquidations/areas of liquidity are KEY market events that often, most likely have an impact on the future price action. That is why professional traders keep a close eye on these levels.
Liquidity vs Liquidations
- Liquidations happen when traders face margin calls due to insufficient funds to keep their trades open. The broker will automatically sell the position. Huge losses are often seen. When this happens, liquidity flows into the market.
- Liquidity is an area where traders can accumulate/distribute large amounts of contracts/shares without affecting the price. Basically, everyone has the chance to buy or sell at a stable price point. It’s a pool of exchanges. Golden areas for institutions, they can execute large orders without exposing their strategies.
So there is a difference between liquidity and liquidations. It is not necessary that liquidations have to happen in order to find liquidity in the market. Liquidity can flow into the market when large volumes are executed. Our Algorithms scan for both liquidity and liquidations. The algorithm does not differentiate between these two.
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“The liquidity signals have helped me to understand the market structure and how liquidity areas can be used to get a superior edge in the market.”
Jesper
