Understanding Market Liquidity and Pricing

If you're looking at this framework here, and we've taken the buy stops, we have

our entry pattern here, what would you be looking for as

a downside objective? Well, I'm gonna teach you the liquidity matrix,

okay? And sounds pretty cool, sounds neat and all that,

but watch what it is.

This here is your range. This is the low of the day, and this

is the high of the

day thus far. So if we take that range and split it from the low

to the high to get the midpoint, all this can be determined by a simple 50

level on

a Fibonacci. So you drag your Fib from this high down

to that low or vice

versa and h- have your 50 level highlighted.

Then anything above that 50 level, this is referred to, from an

algorithmic stance, as a premium market.

It means it's, it's expensive. Now, markets can stay in a premium for a while

and not go to a discount, which would be below the 50 point,

okay? 50%, anything down here is a discount.

If you're bearish, if you're ever going short,

you wanna look at the previous

range. Where are you at inside that range?

So when this formed here, that little fair value gap, once that

formed, you're thinking, "Okay, we are in a premium, so

algorithms will won- want to go to a discount." That's the

opposing side of the marketplace.

So if it's going short here, it's driving the market lower.

What does that mean?

The algorithm is gonna start pricing lower.

You can have all the buyers in the world come in.

If the algorithm is in a sell program and it's going lower, it does not matter.

It's gonna reprice lower and lower and lower, and then what'll happen

is those

buyers that may come in with a huge influx of volume, they're gonna get

crushed, and they get squeezed. You ever hear that term, "Oh, this

is a bear

squeeze. This is a bull squeeze"? All that is is an excuse for them not to know

why

the algorithm's doing what it's doing. That's it. That's all it is.

It's an out, okay? I'm telling you, this is what's really going on.

So the market's moving from this premium high, this specific entry point,

to a level below the 50 of this range, this low

and this high. I want you to think about what,

below this level

here, the 50 level, what is resting below here? Sell stops.

So now think about the idea of someone like you and I that would see this

ideal entry as a short. We have to sell to get in that short.

How do we get out of that short? We gotta buy it back

or cover it by buying.

Well, we're gonna find willing sellers at a low

price relative to this point here.

They're willing, already sitting down there with their sell

stops right below that

low. Now, look closely. What else resides right near that low?

Right there is that imbalance I mentioned, okay?

It's only one single candle passing up, and the previous candle's high, and the

next candle's low. That area right there is an imbalance.

From this area here, it went down below the 50 level and

attacked these sell stops and completely closed in this imbalance.

So every point of this candle's high to this candle's low, that

range with the candle only going up, that's a

buy-side imbalance. It has to have an equal

delivery to be efficiently priced and booked by the algorithm.

It goes down and completely closes it back in with down movement.

Notice the candle on this here. It opens and then trades down.

So it fulfills its role of balancing the buy-side offering, now

the sell-side offering. So that is an efficiently delivered price move.