Do you know where the money sits?

All too often new retail traders are suckered into brokers with large sign up bonuses. These are often referred to as "B" book brokers whereby 9 times out of 10 your money never even hits the real market. They know 90% of people lose 90% of their accounts in 90 days. It doesn't stop there, you either have an influencer who doesn't even trade a live account, giving you analysis - or you are educated on some system or strategy that revolves around retail mentality.

Understanding money-flow can put you on the front foot.

So first of all; Buy and sell side liquidity are areas of price in which buy stops and or sell stops are mostly residing. If you can understand the higher time frame perspectives and see where the "money" is.

This can also be knows as Supply & Demand levels. (visual below)

Back in January 2021; I was showing why these liquidity levels where likely to be used for the re-accumulation phase.

This was highlighting the bias to collect liquidity and move on up to unchartered territory. With a little knowledge of the bias (using Elliott Wave) you could see it was likely accumulation and it's targets up into new levels price had not been before.

You had a pullback level into the "auction" area - thus to pick up it's last round of liquidity before the explosive move up. This was the level in February 2021.

And what does it do?


Combining the two, would give a bias, a pullback level. That plus the extension levels would give a clear target for a move up. This can be seen here on the left for the 3 weekly in Elliott terms and the first distribution (Wyckoff schematic) but over simplified, this is where the money is sat (orders above) and stops below. This giving a pullback target.


As you can see it only followed the money flow;

Once you get a handle on the money levels - you can start to build a plan around it. Price will seek the liquidity in order to either reverse or continue in within it's expansion move.

Step forward into the 4 of the weekly Elliott wave count, which would equate to a type of re-accumulation on the larger scale.
In August we saw the move up and it's pullback into the smaller liquidity level.

This is here -
So as you can see, it's only following money flow.

This follows a very simple pattern which consists of 3 phases;

1) Contraction
2) Expansion
3) Profit taking.


If you see price as reversing at the buy or sell side of liquidity, then you trade the developed price action, if you see price continue to move through the buy or sell side liquidity, then you stick to the order flow of price and trade the buy or sell side that it is, towards the next price objectives.

So at this point here; we had tagged a Fibonacci extension level. We have orders and stops above, we move up again to make a slightly newer high - in essence trapping traders into the wrong side of the trade.

Once you see both sides of liquidity - the next challenge is to simply develop a bias. For me EW is useful, not to trade every swing, but to know where on the roadmap we are. You can then define more objective price targets for pullbacks, entries or exits.


I hope you can start to see how this fits together?

In September I posted this move from the accumulation as to how we could see the liquidity levels above, add the extensions and you now know where we where heading. Using the EW logic as well - it painted the Elliott Weekly 5 (as in the August image) which had liquidity levels in neon lights.

From there liquidity wanted to gather and drop. Whilst influencers where calling for $100k, 135, 275, 300k. ZERO logic supporting their arguments. So what did we do?

So we go seeking liquidity and then the drop.

Now you can use this information for the next move - we know we where going from Distribution (weekly 5 EW) down to a new accumulation. Clearly the larger institutional players where selling into the retail who assumed it was going to moon. (wholesale selling at a premium to retail) keep this in mind.


Once you got your bias and you know where the money sits, it's pretty obvious to trade these moves up and down.

So from here you can look for the contraction levels, this will give a good feel for where the money sits.

You have a bias. And now you have the logic for the next moves.

Here's a question for you....



Enjoy the rest of the weekend!

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Disclaimer
This idea does not constitute as financial advice. It is for educational purposes only, our principle trader has over 20 years’ experience in stocks, ETF’s, and Forex. Hence each trade setup might have different hold times, entry or exit conditions, and will vary from the post/idea shared here. You can use the information from this post to make your own trading plan for the instrument discussed. Trading carries a risk; a high percentage of retail traders lose money. Please keep this in mind when entering any trade. Stay safe.