Kardec Trader explains liquidity auction theory: ignore highs and lows, watch where the market spends time through volume profiles. Smart money breaks large orders into pieces. Rising buy volume on a breakout means it keeps going up; falling exits and rising downside volume means it comes back down.
This is why you keep failing at trading. You keep using the good boys, highs and lows, highs and lows, breakup structures that Charles Dow invented in the 18th century. Markets have evolved, bro. So in 30 seconds, here's the best model to analyze market structure that I have learned by spending two years in the trading floor of the World cup trading champion. And it's called the liquidity auction theory. Here's how it works. When price is in uptrend, don't just look for highs and lows and highs and lows. Look at where the ranges are going because that's where the big volume is and that's where the big money is actually flowing. This is the S and P. And let's say you're a bank and you want to buy a thousand contracts. You have 16 here, 32 here, 30, 50 and so on and so forth. So if you're going to buy a thousand contracts, you're going to move price so much up and you're not going to get filled at the best price. You need a little more time to get all of that liquidity. So here's the secret. Smart money. To optimize their filling of their order or execution alpha, they will fraction their order and put it in the market bit by bit and in a long time. So you can look at the volume profile, which is the money indicators that shows you where the most money was traded. And every time you will see that is where markets spend the most time. So instead of using highs and lows as visual references for price action, use ranges. Because that's where the real money was traded. Because those are the area of balance or fair value. Because both buyers and sellers consider these prices to be a fair price to trade. And now be careful because this is where the money is made. In the areas where we try to exit from fair value, you need to see what happens with order flow and see who's really dominating the market to time your entries and follow the trend with the smart money. So in these situations, if exiting price has less and less volume and dropping in it has more and more volume, this means that we are likely going to break back inside and go to the other side of the range. But if during the breakout, volume increases on the buy side and decreases on the sell side, it's likely that we will keep auctioning higher. And if you don't want to lose any more professional trading value like this, you might want to follow.
