The DaVinci model is a trading strategy that exploits bearish reversals by engineering liquidity. Identify a prior high, wait for price to break it bullish, then reverse downside. Enter below the engineered low, stop above the recent high, and target the prior low for profit.
We'll draw out the DaVinci model on a bearish scenario. We have a level of liquidity to the downside. Price ended up moving bullish, taking out an old high from the left. Now you want to be looking for entries to the downside and then the market starts printing internal, I would call it high respecting high, coming back down to the downside. We want to see price trade below these lows eventually. Typically what happens is you have buyers looking for entries in this area and you see the market react. This is going to be now known as our engineered liquidity. The first, first step, taking out something from the left-hand side, in this example, a high. The next step is you want to see the market sell off to the downside, maybe induce some early sellers. So from this point, we trade above the high, we sell off to the downside, we create an internal liquidity point, price continues selling off and we engineer. Then you have the move back up, boom, highs taken out and then entry, stop loss. That's when you get to capitalize on this whole move to the downside. And we're going to be targeting the liquidity left at this low.
