Risk disclaimer: Not a financial advisor, trading involves risk, trade at your own risk. I am not responsible for the outcome of your trades.

Hello again, this teaching might be one of the most important topic in my tutorials, when we look at a chart and mark out our levels the odds of marking out the same levels from different traders is quite high. But the funny thing is the market dont care where our entry and stop loss is, so without further explanation about how these markets work lets take a look at this lesson.

Different types of orders:

Market order: It is the process of buying an instrument immediately at the best price available. Market order ensures an immediate execution but does not guarantee a specified price. When making a market order the price typically include the highest bid for sellers and the lowest offer for buyers. Generally market orders are useful when you think a price of a coin/asset is priced right and wanted immediate execution.

Limit order: A limit order is a type of order to buy or sell stock with a restriction on the maximum price to be paid or the minimum price to be received. When these types of orders are executed it will at the specified price or better, however these type of orders does not always guarantee execution depending on the order flow of the particular asset/market. A limit order maybe appropriate if you think you can buy a stock at a price lower than a specific price or selling higher than the current market price. Limit orders add liquidity to the order book as it allows market orders to execute against them. Be careful when using these types of orders as your limit order may not be filled and the market might move away without you.

Liquidity:

We know that making a market order takes liquidity from the market and making limit orders makes liquidity in the market. We discussed earlier about how different traders who uses the same technique might have same levels lined out in their chart. Liquidity or liquidity pool refers to the resting orders above or below a key support/resistance levels. Having a deeper understanding of liquidity will help us in better understanding of what these markets are doing.

Stop loss hunting:

A stop loss is also a type of order in the market that a trader can use to protect his position if the market moved against him/her. Once a stop loss is triggered it becomes a market order. The stop order will be a market order only when the specified price is triggered. A particular asset gives out the same price action for different traders, due to this a stop loss level might have a large order on the price level which is called order clustering. In this scenario a process called stop hunting is performed by the market makers. Price will trade through the stop loss price levels and triggered stop limit orders into market orders, price will move until liquidity demands for those market orders are satisfied. If that scenario is indeed a stop hunt and not a break in market structure(to be discussed in future lessons) price will reverse when liquidity conditions improve given liquidity demands have been met, large limit orders being filled during the process of stop hunt, and when breakout traders are caught offside forcing to close their positions. We must note that not everything is a stop loss hunt otherwise there will be no trend in the market. Large order clustering are more significant in higher time frames. If your order gets triggered in these stop hunt event you might as well develop some new techniques in your trading as well.

That is all for todays lessons, I wish you good luck in your trading, if you enjoyed this lesson consider leaving a btc tip :

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