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Order flow and liquidity gaps

Started by Bitcoin, Feb 07, 2022, 02:51 pm

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Order flow and liquidity gaps

I'm currently studying order flow, especially auction market theory and how demand and supply works.
One thing I noticed that works quite well is that whenever there is a liquidity gap and when the price is revisiting there after the creation, of course there're some elements to consider as to if it's really gonna work which I'm not gonna discuss here, most of the time the price bounces.

As you can see in the pic enter image description here

The area would be a single print area in market profile chart.
And what I think about why it works is that in these liquidity gaps, there should be unfilled limit orders, because, as in the picture example, the price went up due to the strong market buying or simply weak market selling(but still market buyings are relatively strong here), and also the limit buyers are definitely chasing this move up as you can tell from the pull back(not the red circle point but around the blue circle point) where there are market sellers absorbed by limit buyers that caught up there.
So, in the gap part, market selling was weak and market buying pressure was strong, and limit buyers are also chasing well, meaning limit buy orders are left unfilled in the part, creating demand zone there.
I think it explains well but I'm not sure if it's true, can someone explain this??

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