A trader explains how price gaps reveal sell-side liquidity and create high-probability entry points. He walks through a recent move from $26.4 to $24.9, showing how a daily candle rejection formed a bullish fair-value gap that signaled where to enter a reversal trade.
When it comes to having gaps like this, this is the highest probability draw there is in the market in general. And if you guys compare this after, it looks very similar to what we have here. And as you guys can see, we basically came down and we had a massive sell day. We filled this gap. To me, that's still not enough because I want to see these gaps here get violated or any ones that we create to the upside. We actually came all the way down from here, all the way to $26.4 to $24.9. But what do you notice? These lows are still intact. So in my eyes, this is our sell-side liquidity here. We have a rejection on the daily candle, right? We came all the way down and we reversed back up. What is happening during this reversal? In this case, it's all on the daily timeframe. We came back up and we rejected back down. We left a daily bullish fair value gap here. And then what do we do? We inverse it. This is where after days of waiting, waiting, waiting for this move, this is where I strike. This is where I get interested in the market.
