How to use Retail Liquidity part 2

4 May 2023 · 1 min

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In this segment of the tutorial, the presenter explains why price levels where highs and lows are relatively equal become the strongest liquidity zones. Retail traders tend to focus on these levels, interpreting past rejections as strong support or resistance. When such a level is broken, retail participants often rush to take the opposite side—going long after a resistance break or short after a support break—based on the belief that the move will continue dramatically. The speaker argues that market makers deliberately reverse price after these liquidity zones are taken, selling to panicking retail traders who are now on the wrong side of the trade. This dynamic, according to the presenter, explains why the majority of traders (about 90%) consistently lose, as they end up buying high and selling low while market makers profit from the opposite flow.

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Because remember what I said about liquidity. In order for the markets to go up, you need to go down. And similarly, when it comes to liquidity, relatively equal lows and relatively equal highs are always the levels of the highest liquidity. Why? Because retail traders will look at these 2 levels, for example. Oh, look, this level. At this level, we got rejected once and twice. This must mean that this level is really strong resistance, which means that if the price does come back here, oh, look at that. Resistance has been broken. So we're going to go long because we have been taught that when resistance is broken, well, it's just going to go to the moon. And that is also the reason why the market makers always reverse the price whenever liquidity levels are taken. Because imagine this, right? Support is broken, all the retail traders start panicking and they go short right here. They literally become winning sellers at low prices. And guess who's going to be selling to them? The market makers. Because, well, why not? You always buy low, sell high. You don't sell low, buy high. That's exactly what happens with 90% of traders out there.