Profiting From Trapped Traders

Lots of algorithms and discretionary trade on the back of news releases, making them some of the most volatile moves you can get within the trading day. When a market receives an economic data point which means the market is incorrectly priced based on new information, the repricing is swift. These new prices advertise a potential trend reversal or continuation which gets more discretionary traders involved. The dark side of this type of trading is that money managers or market makers could potentially wait for the less informed traders to jump in on the developing trend, only to use their orders to buy or sell in to. This is when we talk about a liquidity grab. What we’re waiting for is a significant move, eg. >50% of the Daily ATR and or, new daily trading high or low. That is the setup. The filter is, whether or not there had been an economic/fundamental catalyst driving this move. The signal is when we reverse all the way back to the price that the move originated from, as this is when traders puke their position so as not to suffer a loss. 

For more trading details, please check the hyperlinks with time stamp indicated from the video:

0:12 EUR/USD