Gold traders get trapped when sharp sell-offs sweep away earlier buyers, leaving long positions underwater. Watch where liquidity builds at highs and retested lows, then enter long above a retested low with stops just below it and targets near the preceding high.
We can see how price from the highs— again, this is gold— big sell-off and we have swept all types of lows from the left-hand side. So any buyers in the market here, once price sells below, we understand that there was buyers that traded here. They've been trapped. So overall, I do want to start seeing price back up to the upside. Look at the amount of liquidity we are building at the highs. We have the market tapping into this area once, twice. We go long off an area that had liquidity and then we go long. Price comes up to the high and builds liquidity. We have a level of liquidity we can look to target eventually. Then price sells off and we trade below an old low. From there, We understand that there is liquidity above here. We want to target that. Price runs these lows to the left-hand side. We go bullish. This is going to be a trap area. We do not want to be selling from these areas since we are respecting the highs. This would be known as an engineered liquidity point. We need to see early buyers. And look what happens here. What I would call a buildup of liquidity. Why is this a buildup? Low was taken and then price comes up, takes the highs. People want to be buying above this low. Entry taken, stop loss below the low, target back at the highs.
