- Bitcoin recently tested a supply zone, offering a minor reaction before reclaiming liquidity above and below key levels
- Current focus shifts to new liquidity zones, including two equal lows, which could trigger significant moves
- Understanding demand, supply, and liquidity can help traders improve risk management strategies
In our previous analysis of Bitcoin, we identified a potential reaction near a supply zone.
And indeed, Bitcoin initially reacted as expected, giving a slight move downward.
This move could have allowed disciplined traders to set their stop-loss at break-even—a trading technique where the stop-loss is adjusted to the entry point, eliminating potential losses if the trade reverses.
However, Bitcoin had a bigger plan. After a brief reaction, it surged upwards, collecting liquidity above its earlier highs before reaching another higher supply zone.
This time, the reaction was much stronger, driving the price downward to collect liquidity that had been “forgotten” below.
Breaking Down Key Concepts
- False Resistance and Equal Lows: As Bitcoin dropped, it created what appeared to be a resistance level. However, this was a trap!
- Liquidity Grab: Once liquidity builds up below this resistance, the market often drops sharply to “grab” it, before reversing or continuing its move. This is a frequent behavior in markets where large players seek to manipulate for gains
What’s Next for Bitcoin?
Looking at the daily time frame, Bitcoin has grabbed liquidity both above and below. The price is now positioned near interesting zones that could lead to a reaction.
However, to increase the probability of a significant move, it would be ideal to see Bitcoin leave some liquidity behind first. This would provide a clearer motive for a stronger move later on.
The Reality Check
Remember, nothing is ever guaranteed. Markets are unpredictable, and while we can prepare scenarios based on past data and behavior, Bitcoin’s price can still move in unexpected ways. Always approach with caution and manage your risk effectively.
Why This Matters
- Understanding liquidity traps like false resistance and equal lows can give you an edge.
- Combining supply/demand zones with liquidity concepts adds depth to your analysis.
- A disciplined approach, like using the break-even technique, can save you from unnecessary losses.
Disclaimer: The information provided in this article is for informational and educational purposes only and does not constitute financial, investment, or trading advice. Any actions you take based on the information provided are solely at your own risk. We are not responsible for any financial losses, damages, or consequences resulting from your use of this content. Always conduct your own research and consult a qualified financial advisor before making any investment decisions.
