Tradetopia Field Notes | Issue #39

You see a dozen setups that look "good." But you don't know which one to take.

You hesitate on a trade, and it runs without you. You take another, and it immediately stops you out.

You feel like you're constantly one step behind the market, guessing at what it's going to do next.

One of our traders, Sofia, put it perfectly in a recent session:

She's asking the exact right question.

If you feel like you're missing a piece of the puzzle, it's probably because you're still just looking at candlestick patterns. You're looking at the "what" without understanding the "why."

To get to the next level, you have to stop looking at candles and start seeing the story behind them. And that story is all about two things: liquidity and imbalance.

The Market's Fuel Source: Liquidity

Think of liquidity as fuel. It's pools of orders sitting in the market. Where are they?

• Above every obvious high (buy stops, breakout buy orders)

• Below every obvious low (sell stops, breakout sell orders)

Big money needs this fuel to fill their large positions. They can't just click "buy" on a million shares without moving the price against themselves. They need to go where the orders are.

So, they hunt for it.

And they're smart about it. They use anything they can as an excuse for volatility:

• News events - CPI, FOMC, earnings. The perfect cover for a liquidity sweep.

• NY open - The highest volume session of the day. The perfect time to move price aggressively and trigger stops.

• Any narrative - "The market is reacting to geopolitical tensions." "Traders are pricing in the Fed pivot." It doesn't matter. It's all just noise to justify the orchestration.

They'll push the price just above a key high, triggering all the buy stops and suckering in breakout traders, only to reverse and sell into that surge of buying. They'll push it just below a key low, triggering all the sell stops, only to reverse and buy into that wave of selling.

As I told the group:

It's not random. It's a hunt for fuel. And the biggest reversals need MONEY to move. That's why they target liquidity first.

The Footprint of Big Money: Imbalance

Once big money has its fuel, it makes its move. And it moves fast.

When you see a huge, aggressive candle that rips in one direction with no pullback, that's not just a "big green candle."

That's an imbalance, FVG or whatever term you care to use.

It's a footprint. It's a clue that a large player has stepped into the market with such force that it left a void. The market is inefficient in that spot.

And here's the key: imbalances act as magnets. The market seeks efficiency. It wants to come back and fill that void. But remember, the biggest reversals need MONEY to move. That's why the liquidity sweep happens first. The imbalance is the result of that captured liquidity being deployed.

Putting It Together: The A+ Setup

So how do you use this?

You stop looking for random patterns and start looking for this sequence of events:

1. Identify the Liquidity Pool: Where is the obvious previous high or low that the market is likely to target?

2. Wait for the Sweep: Don't predict it. Wait for the market to actually run above that high or below that low. This is the "stop hunt." This is where smart money captures the fuel it needs.

3. Look for the Reversal and Imbalance: After the sweep, does the market reverse with force? Does it leave a big, obvious imbalance candle in the opposite direction? This is your confirmation that the liquidity hunt was successful and the real move is beginning.

4. Enter on the Retracement: The highest probability entry is often on a pullback but here's what most traders miss… the market targets where the smart money orders captured liquidity. That's the sweep point. The imbalance serves as a magnet, drawing price back toward efficiency, but the real power is in the liquidity that was captured.

This sequence—Liquidity Sweep → Market Structure Shift → Imbalance → Entry…is one of the most reliable models in trading. Because you're not just trading a pattern. You're trading a story. You're following the footprints of the big money.

Stop Guessing, Start Reading

If you feel like you're just guessing, it's because you're not reading the language of the market.

Candlestick patterns are the alphabet. Liquidity and imbalance are the grammar. They give the letters meaning. They tell you the story.

Of course, this is merely the foundation. I just wanted to get your brain churning a bit.

We teach this step-by-step in our free Tradetopia classroom. If you want to go deeper on how to identify liquidity pools, qualify sweeps, and time your entries, that's where we break it all down.

Start looking for this story on your charts. Where is the fuel? Where are the footprints? When you start seeing the market this way, everything changes.

You'll have more clarity. You'll have more confidence. And you'll finally feel like you're one step ahead, not one step behind.

PS: Pull up a chart right now. Can you find an obvious old high or low that was recently swept? What happened right after? Did it leave an imbalance?

PPS: The market isn't random. It's orchestrated. Your job is to learn how to read the sheet music.

PPPS: We’re live every trading day for the rest of the year, don’t miss out!

From Tradetopia,
Mike Navarrete 🧙🏽‍♂️