Cracking The Market Code – Coin Observatory
For backtesting, we’ll start with another unrelated asset, FedEx ticker “FDX”:
The FedEx 90 Minute chart, over a period of 1,317 days, when we apply our Maximum Liquidity formula we get 40 unique opportunity signals. Signals to either buy, sell, short-sell, hedge, or trade options.
With so many ways for market participants to approach these unique opportunities, we won’t highlight the profitability of each strategy, just the nature of the signals.
It appears that our Max Liquidity theory is profitable in trading ranges and during corrective phases. Maximum Liquidity is at the top and the bottom of trading ranges, at extremes below the previous low, and above previous range high. A long entry at the maximal liquidity swing low will allow participants a (buy low sell high) range trade. If the range was to break out, then one would have secured the absolute low, prior to a breakout into a trending market. Or conversely the extreme swing point high above the range prior to a bearish breakout.
If the participant was to long at the maximum liquidity low buy signal, then hedge the next sell signal and set proper stops. They would secure the range’s profits and allow the market to do the rest of the work.
If the asset was to breakout to the long-side or short-side, the participant would have captured excellent entries for either direction. This process removes all bias from the trade.
As a market starts trending, the theory of maximum liquidity becomes less and less profitable, participants might consider waiting for ranges to establish, then either range trade, hedge short at swing highs, add to their long position at swing lows, or just buy max liquidity lows, and sell max liquidity highs.