The reason why I never make a breakout order: the trap set by market makers to hunt for liquidity

Key Points：

• $BTC Has No Market Maker, But Short-Term Price Trends May Be Manipulated
• The Blade That Slaughters Retail Investors: Introduction and Cases of Liquidity Hunting (Stop Hunt)
• Stop Hunt Judgment: Not Every Stop Hunt Leads to a Reversal
• Stop Hunt is a Concept, and Other Conditions are Needed to Form a System

BTC Has No Market Maker, But Short-Term Price Trends May Be Manipulated

In a popular definition, "market maker" refers to an entity with "high control over a single asset".

BTC has a large market cap, relatively good liquidity, and sufficiently distributed tokens, so there is no "single group that can control the market"!

Interestingly, in a situation of liquidity drought,even for a large-cap asset like BTC, short-term price trends can still be manipulated!

While these "manipulators" cannot completely control BTC's trend, they can still "create traps" on small-scale candlestick charts to achieve their goals.

This article will provide a detailed breakdown of such situations.

The Blade That Slaughters Retail Investors: Introduction to Liquidity Hunting (Stop Hunt)

If you believe that "short-term market trends can be manipulated", then you must understand "what is liquidity hunting (Stop Hunt)".

Stop Hunt, as the name suggests: hunting stop losses.

The principle is as follows:

1. Large funds (such as institutions) building positions can cause significant price movements
2. Large funds are not stupid; they want to reduce "losses" when building positions
3. Through Stop Hunt, they make retail investors provide liquidity, thereby reducing losses

Now, the question is: how to make retail investors provide liquidity?

Retail investors' behavior is highly "disorderly", but at specific time points, their operations can become highly consistent, and these time pointsprovide sufficient space for Stop Hunt operations.

For example:After a very obvious "support zone" is broken, two highly consistent order types appear in the market:

1. Stop loss orders (sell) for those who went long above the support zone
2. Orders (sell) from "breakout traders" after breaking the support zone

Did you notice? Both order types are "sell", which provides liquidity that can help large funds reduce losses when building long positions!

Words are not enough, let's look at some actual cases.

Real Trading Case Studies of Liquidity Hunting (Stop Hunt)

I found 4 assets: BTC, ETH, SOL, and LINK. Other assets also show similar traces, and interested readers can research further.

First, BTC, during the period around ETF approval last year.

You can see:

1. Four yellow points are very close, forming a clear "support zone"
2. Price then breaks through, bringing in many breakout traders and long position stop loss orders
3. These orders become "liquidity for large funds", ultimately triggering a new wave of surge

The positions marked with "red boxes" are also a way of Stop Hunt.

Because besides "support and resistance zones","previous highs and lows" are also positions where retail investors often place stop lossesand anchoring points for breakout traders!

Next, ETH.

I marked 5 red boxes, each representing a very classic Stop Hunt.

Now, let's look at SOL.

The pattern on the left side of the image is almost identical to BTC's, revealing clear market manipulation traces.

Finally, it's Link.

As shown in the image, everywhere is Stop Hunt, everywhere is liquidity squeeze.

Concept Clarification: Identifying Stop Hunt & System Construction

Many people develop a "persecution complex" about the market after understanding Stop Hunt.Actually,not every breakthrough or breakdown at a specific level is a Stop Hunt.

In actual trading:

It's not about constantly guessing "funds will do a Stop Hunt here"

But to observe carefully and check if large funds show signs of market manipulation

Finally,Stop Hunt is just a form of market manipulation, not a "trading system".

Many beginners start "gambling" on the market after learning about Stop Hunt,but this approach is not recommended, and sometimes it leads to "the more you know, the more you lose".

Again, this approach of "betting on a Stop Hunt" is not advisable!

To form a trading system, more conditions are necessary, such as combining Taker analysis methods, other data, indicators, etc. After all, financial markets are brutal, and with only a single analysis method, it's impossible to consistently profit in the market.

That's today's sharing, hope it helps you, thank you for reading.