Liquidity zones are the essential element of Smart Money trading. These zones provide the safest and the most accurate trading opportunities.
The problem is, however, that it is quite complicated for the newbie traders to identify these zones properly. But there is ONE liquidity zones technical indicator that can help.
In this article, I will show you the best technical indicator for the identification of liquidity zones in SMC.
This technical indicator is called Volume profile.
Adding that on your chart, you should look for low volume and high volume nodes.
High volume nodes indicate the price levels on the chart where big volumes were traded and a high activity of the market participants occurred.
The indicator plots 3 significant volume spikes.
These are 3 high volume nodes.
After you identified high volume nodes, you should analyse a price action and recognize related historical structures.
By related structures, I mean historical levels that were respected by the market and from where significant price movements initiated.
When you underlined these structures, you should consider the wicks and candle closes.
Low volume nodes indicate the price levels on the chart where it has been relatively little trading activity and limited participation from market participants.
These zones indicate a lack of liquidity, which can impact the ease of price movement in those areas.
Here are 2 low volume nodes that I spotted.
After you spotted low volume nodes, you should analyse a price action and recognize related historical structures.
Here are the liquidity zones that are based on low volume nodes.
Again, these areas are based on wicks and candle closes.
These 5 area will be the important liquidity zones from where Smart Money trader can look for trading opportunities.
Learn to recognize liquidity zones properly and improve your trading.
