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Liquidity Inducement Trap Case Study

The document discusses the concept of a liquidity inducement trap (LIT), where the creation of liquidity at a point of interest fails to move the price as intended. An LIT occurs when the market lacks enough liquidity to reach its desired price level, causing it to continue inducing more liquidity through mechanisms like targeting weak hands or creating fear of missing out. The key aspect of an LIT is that it can repeat multiple times as long as the market is unable to attain the liquidity needed to move the price to its target level.

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youssef marzak
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1K views4 pages

Liquidity Inducement Trap Case Study

The document discusses the concept of a liquidity inducement trap (LIT), where the creation of liquidity at a point of interest fails to move the price as intended. An LIT occurs when the market lacks enough liquidity to reach its desired price level, causing it to continue inducing more liquidity through mechanisms like targeting weak hands or creating fear of missing out. The key aspect of an LIT is that it can repeat multiple times as long as the market is unable to attain the liquidity needed to move the price to its target level.

Uploaded by

youssef marzak
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
  • Liquidity Inducement Trap: Explains the concept of liquidity inducement traps in trading, including what it is and an example diagram to illustrate the concept.
  • Examples on Charts: Presents concrete examples on charts demonstrating the application of liquidity inducement traps in trading.
  • Understanding Trade Stories: Encourages traders to consider underlying stories and market dynamics that influence trading beyond just technical analysis.

Liquidity inducement trap

What is liquidity inducement trap(LIT)


Any creation of liduidity on the way to point of interest is LIT

Example of liquidity inducement trap:


Notes to remember

Price needs liquidity to move and to introduce liquidity in the


markets these high or lows are often created.this also induces
weak handed traders,FOMO traders who are unsure about their
poi.

theres no limit to how many LIT there can be before the final
mitigation.as long as market doesnt have enouh liquidity to
move to its desired price level its going to continue building
liquidity
Some examples on charts
Pay attention to the story behind your trade

Hope everybody learned something new


~reaper

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