Inducement Liquidity: Wick vs. Body Breaks in Bearish Structure

A lot of traders think they understand the concept of inducement liquidity, but in reality, you don't.

You know when people come and draw this pattern, right?

They say, "Oh, we had a break of structure here, then we had another break of structure here, and then this guy now becomes an inducement where price comes, takes it out, and breaks structure," right? So this guy here becomes an inducement.

A lot of traders know this pattern, but when it comes to identifying it in the charts exactly as it should be, that's a problem.

Now, this is what I mean. When you look at this chart, you can see that structure is clearly bearish, right?

We had a break of structure here, we had another break of structure here, we had another break of structure here, and we're supposed to have a final break of structure here.

But when you look closely, can you see what happened, right?

You can clearly see that this guy here closed with a body, this guy here closed with a body, this guy here closed with a body, but this guy here has closed with a wick.

Now, whenever an origin or another block, whatever is here, is not able to close price with a body, that point now becomes an inducement for the previous points that caused the break of structure with the body.

So basically, this is what I mean. Your entry for this type of charts would now look something like this, where this guy is an inducement.

So you'd expect that the next time price comes back up here, it's going to take out this point.

This point is not protected because it did not close with a body.

So when you play price, you can see how price has taken out this point, and you'd expect it to respect this point and eventually go down to take out this low as the draw on liquidity.

And as you can see, like so, you can see how... Okay, it has not taken it out yet.

So you can see how it has eventually...

You can see how it has eventually taken it out, right, after using it as an inducement for this other block.

And that is how inducement liquidity works.