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  #1 (permalink)
medj
Manchester
 
Posts: 16 since Jun 2018
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I was originally sending this via PM to a single user but as I havent posted anything I am unable to do this. However i believe answers to my question will be benefit other people as well so here goes..

I'm just getting into reading the book in my trading, i've been focused on simple aggressive traders rather than passive for too long now. I'm using heatmap instead of the dom to see the limits, what is your thoughts on high liquid areas of the book being magnet areas where price heads to that direction of high liquidity?

Say i am long, and large volume offers are above and not many below on the bid at all, will price head towards the offers or move down taking advantage of there being no large bidders and so no absorption can take place?

Thanks traders, hopefully someone sees this

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  #3 (permalink)
medj
Manchester
 
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i should have mentioned, i'm talking about low time frame quick trades of 5 points. Looking at high liquidity areas a couple ticks/ points above current price. Will price be magnetized towards it or is it a deterrent and price will move away,

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 xplorer 
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medj View Post
what is your thoughts on high liquid areas of the book being magnet areas where price heads to that direction of high liquidity?


medj View Post
Will price be magnetized towards it or is it a deterrent and price will move away,

I look at it differently. I tend to believe the school of thought that suggests that price tends to follow the path of least resistance.
This to me translates into price heading through a path that - at that point in time - offers less liquidity.

Of course this would also infer that, if there is a large limit order somewhere, but there is not much liquidity between where the market is and that large limit order, it would look like price is attracted there, provided that is the path of least resistance.

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medj
Manchester
 
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xplorer View Post
I look at it differently. I tend to believe the school of thought that suggests that price tends to follow the path of least resistance.
This to me translates into price heading through a path that - at that point in time - offers less liquidity.

Of course this would also infer that, if there is a large limit order somewhere, but there is not much liquidity between where the market is and that large limit order, it would look like price is attracted there, provided that is the path of least resistance.

See thats what I would think as well but when you think about it in terms of actual order flow the big players need liquidity to get their fills and so 'bump' price towards the liquidity pools where they are either absorbed or fuelled by momentum; if that makes sense?

So maybe your second point is more likely the case, price attracted to large liquidity if the path has little resistance.

Thanks for the reply Xplorer

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Last Updated on November 22, 2018


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