🚨 A few examples of how liquidation "hunt" is the name of the game in low liquidity environments
Keep in mind it's not necessarily active hunting of liquidations, though it may be to fill large orders
Here's how it usually goes:
➡️ Liquidation Clusters = Price Magnets (Not 100% of the time, keep the market context in mind ⚠️⚠️). Leverage positions set up predictable areas where forced liquidations occur, often resulting in explosive moves.
➡️ Forced Cascade. Liquidations are automatically executed as market orders, creating a burst of volume that causes a rapid, sharp move if current liquidity is insufficient (a liquidation cascade).
➡️ "Whales" Step In or have been ready and waiting (Absorption). Large traders utilize these moments of forced selling/buying to fill significant orders, effectively providing liquidity for those forced to exit.
➡️ Momentum Gone. Once passive orders absorb the aggressive market flow, the momentum ceases, and the price often slows down, forming a local accumulation or distribution phase, indicating a LOCAL (sometimes global) reversal
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