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<\/p>\nThink of the market as a battlefield.<\/p>\n
There are two sides and they’re always fighting it out.<\/p>\n
Bulls want to see the market rise, while bears believe it should fall.<\/p>\n
Both sides have their defensive positions, as well as strategic bases from which they can launch attacks.<\/p>\n
Understanding the market along these lines is crucial for traders…<\/p>\n
When you start thinking about where each side is strong and weak, you begin to understand where the market is most likely to go.<\/p>\n
You see, the market needs liquidity to power its big moves. Liquidity is cash coming into the market through either fresh buying or selling, or from traders exiting existing positions.<\/p>\n
All price charts are full of liquidity zones. Frequently, these zones are where other traders have placed their stop loss orders. Bulls and bears will heavily defend these areas.<\/p>\n
Breaking a liquidity zone usually results in a burst of volatility.<\/p>\n
How quickly that volatility settles down, and how far it moves the market, are crucial clues that can tell you what’s going to happen next.<\/p>\n
That’s why being able to spot liquidity zones on a price chart is an enormous advantage.<\/p>\n
Let’s look at a chart of gold so I can show you how to do just that.<\/p>\n
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I’ve labeled the liquidity zones on the price chart.<\/p>\n
Once you know what to look for, these zones will be obvious to the naked eye.<\/p>\n
The key is to spot areas where prices have stalled. In other words, look for where the bulls and bears have drawn their battle lines.<\/p>\n
Zone #1 took shape between April 19 and May 1. Bulls fought hard to establish a floor and were successful in doing so, eventually sending the marker higher to $2,056.<\/p>\n
Once gold topped out, prices turned lower, looking to test that same zone on the way down.<\/p>\n
As you can see, bulls put up a fight… But ultimately lost on May 18.<\/p>\n
As prices broke below the zone, bulls bailed on their losing positions, adding fuel to the breakdown.<\/p>\n
It’s too early to say that bears have won the war. It’s more likely they’ve won a battle.<\/p>\n
And now, bulls have retreated to another defensive position, labeled Zone #2.<\/p>\n
Zone #2 took shape between March 21 and April 2. We’ll see in real time if this zone will be better defended than the first.<\/p>\n
What’s clear is that one side will win, and the other will lose.<\/p>\n
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Free Trading Resources<\/strong><\/p>\n Have you checked out Jeff’s free trading resources on his website? It contains a selection of special reports, training videos, and a full trading glossary to help kickstart your trading career \u2013 at zero cost to you. Just click here<\/a> to check it out.<\/p>\n<\/p><\/div>\n<\/div>\n <\/p>\n If bulls successfully defend this second zone, then the market will likely travel back towards Zone #1.<\/p>\n On the other hand, if bears win again, the market will continue to break lower, seeking out the next support zone.<\/p>\n Happy trading,<\/p>\n Imre Gams<\/p>\n <\/p>\n