Liquidity strategy tester [Influxum]

11 sept.

This tool is based on the concept of liquidity. It includes 10 methods for identifying liquidity in the market. Although this tool is presented as a strategy, we see it more as a data-gathering instrument.

Warning: This indicator/strategy is not intended to generate profitable strategies. It is designed to identify potential market advantages and help with identifying effective entry points to capitalize on those advantages.

Once again, we have advanced the methods of effectively searching for liquidity in the market. With strategies, defined by various entry methods and risk management, you can find your edge in the market. This tool is backed by thorough testing and development, and we plan to continue improving it.

In its current form, it can also be used to test well-known ICT or Smart Money concepts. Using various methods, you can define market structure and identify areas where liquidity is located.

• Fair Value Gaps - one of the entry signal options is fair value gaps, where an imbalance between buyers and sellers in the market can be expected.
  
• Time and Price Theory - you can test this by setting liquidity from a specific session and testing entries as that liquidity is grabbed
  
• Judas Swing - can be tested as a market reversal after a breakout during the first hours of trading.
  
• Power of Three - accumulation can be observed as the market moving within a certain range, identified as cluster liquidity in our tool, manipulation occurs with the break of liquidity, and distribution is the direction of the entry.
  

🟪Methods of Identifying Liquidity

Pivot Liquidity
This refers to liquidity formed by local extremes – the highest or lowest prices reached in the market over a certain period. The period is defined by a pivot number and determines how many candles before and after the high/low were higher/lower. Simply put, the pivot number represents the number of adjacent candles to the left and right, with a lower high for a pivot high and a higher low for a pivot low. The higher the number, the more significant the high/low is. Behind these local market extremes, we expect to find orders waiting for breakout as well as stop-losses.

Gann Swing
Similar to pivot liquidity, Gann swing identifies significant market points. However, instead of candle highs and lows, it focuses on the closing prices. A Gann swing is formed when a candle closes above (or below) several previous closes (the number is again defined by a strength parameter).

Percentage Change
Apart from ticks, percentages are also a key unit of market movement. In the search for liquidity, we monitor when a local high or low is formed. For liquidity defined by percentage change, a high must be a certain percentage higher than the last low to confirm a significant high. Similarly, a low must be a defined percentage away from the last significant high to confirm a new low. With the right percentage settings, you can eliminate market noise.

Session Range (3x)
Session range is a popular concept for finding liquidity, especially in smart money concepts (SMC). You can set up liquidity visualization for the Asian, London, or New York sessions – or even all three at once. This tool allows you to work with up to three sessions, so you can easily track how and if the market reacts to liquidity grabs during these sessions.
Tip for traders: If you want to see the reaction to liquidity grab during a specific session at a certain time (e.g., the well-known killzone), you can set the Trading session in this tool to the exact time where you want to look for potential entries.


Unfinished Auction
Based on order flow theory, an unfinished auction occurs when the market reverses sharply without filling all pending orders. In price action terms, this can be seen as two candles at a local high or low with very similar or identical highs/lows. The maximum difference between these values is defined as Tolerance, with the default setting being 3 ticks. This setting is particularly useful for filtering out noise during slower market periods, like the Asian session.

Double Tops and Bottoms
A very popular concept not only from smart money concepts but also among price pattern traders is the double bottom and double top. This occurs when the market stops and reverses at a certain price twice in a row. In the tool, you can set how many candles apart these bottoms/tops can be by adjusting the Length parameter. According to some theories, double bottoms are more effective when there is a significant peak between the two bottoms. You can set this in the tool as the Swing value, which defines how large the movement (expressed in ticks) must be between the two peaks/bottoms. The final parameter you can adjust is Tolerance, which defines the possible price difference between the two peaks/bottoms, also expressed in ticks.


Range or Cluster Liquidity
When the market stays within a certain price range, there’s a chance that breakout orders and stop-losses are accumulating outside of this range. Our tool defines ranges in two ways:
Candle balance calculates the average price within a candle (open, high, low, and close), and it defines consolidation when the centers of candles are within a certain distance from each other.
Overlap confirms consolidation when a candle overlaps with the previous one by a set percentage.


Daily, Weekly, and Monthly Highs or Lows
These options simply define liquidity as the previous day’s, week’s, or month’s highs or lows.

Visual Settings
You can easily adjust how liquidity is displayed on the chart, choosing line style, color, and thickness. To display only uncollected liquidity, select "Delete grabbed liquidity."

Liquidity Duration
This setting allows you to control how long liquidity areas remain valid. You can cancel liquidity at the end of the day, the second day, or after a specific number of candles.

🟪Strategy
Now we come to the part of working with strategies.

Max # of bars after liquidity grab – This parameter allows you to define how many candles you can search for entry signals from the moment liquidity is grabbed. If you are using engulfing as an entry signal, which consists of 2 candles, keep in mind that this number must be at least 2. In general, if you want to test a quick and sharp reaction, set this number as low as possible. If you want to wait for a structural change after the liquidity grab, which may require more candles, set the number a bit higher.


🟪Strategy - entries
In this section, we define the signals or situations where we can enter the market after liquidity has been taken out.

• Liquidity grab - This setup triggers a trade immediately after liquidity is grabbed, meaning the trade opens as the next candle forms.
  
• Close below, close above - This refers to situations where the price closes below liquidity, but then reverses and closes above liquidity again, suggesting the liquidity grab was a false breakout.
  
• Over bar - This occurs when the entire candle (high and low) passes beyond the liquidity level but then experiences a pullback.
  
• Engulfing - A popular price action pattern that is included in this tool.
  
• 2HL - weak, medium, strong - A variation of a popular candlestick pattern.
  
• Strong bar - A strong reactionary candle that forms after a liquidity grab. If liquidity is grabbed at a low, this would be a strong long candle that closes near its high and is significantly larger compared to typical volatility.
  
• Naked bar - A candlestick pattern we’ve tested that serves as a good confirmation of market movement.
  
• FVG (Fair Value Gap) - A currently popular concept. This is the only signal with additional settings. “Pending FVG order valid” means if a fair value gap forms after a liquidity grab, a limit order is placed, which remains valid for a set number of candles. “FVG minimal tick size” allows you to filter based on the gap size, measured in ticks. “GAP entry model” lets you decide whether to place the limit order at the gap close or its edge.
  

🟪Strategy - General

• Long, short - You can choose whether to focus on long or short trades. It’s interesting to see how long and short trades yield different results across various markets.
  
• Pyramiding - By default, the tool opens only one trade at a time. If a new signal arises while a trade is open, it won’t enter another position unless the pyramiding box is checked. You also need to set the maximum number of open trades in the Properties.
  
• Position size - Simply set the size of the traded position.
  

🟪Strategy - Time
In this section, you can set time parameters for the strategy being tested.

• Test since year - As the name implies, you can limit the testing to start from a specific year.
  
• Trading session - Define the trading session during which you want to test entries. You can also visualize the background (BG) for confirmation.
  
• Exclude session - You can set a session period during which you prefer not to search for trades. For example, when the New York session opens, volatility can sharply increase, potentially reducing the long-term success rate of the tested setup.
  

🟪Strategy - Exits
This section lets you define risk management rules.

• PT & SL - Set the profit target (PT) and stop loss (SL) here.
  
• Lowest/highest since grab - This option sets the stop loss at the lowest point after a liquidity grab at a low or at the highest point after a liquidity grab at a high. Since markets usually overshoot during liquidity grabs, it’s good practice to place the stop loss at the furthest point after the grab. You can also set your risk-reward ratio (RRR) here. A value of 1 sets an RRR of 1:1, 2 means 2:1, and so on.
  
• Lowest/highest last # bars - Similar to the previous option, but instead of finding the extreme after a liquidity grab, it identifies the furthest point within the last number of candles. You can set how far back to look using the # bars field (for an engulfing pattern, 2 is optimal since it’s made of two candles, and the stop loss can be placed at the edge of the engulfing pattern). The RRR setting works the same way as in the previous option.
  
• Other side liquidity grab - If this option is checked, the trade will exit when liquidity is grabbed on the opposite side (i.e., if you entered on a liquidity grab at a low, the trade will exit when liquidity is grabbed at a high).
  
• Exit after # bars - A popular exit strategy where you close the position after a set number of candles.
  
• Exit after # bars in profit - This option exits the trade once the position is profitable for a certain number of consecutive candles. For example, if set to 5, the position will close when 5 consecutive candles are profitable. You can also set a maximum number of candles (in the max field), ensuring the trade is closed after a certain time even if the profit condition hasn’t been met.
  

🟪Alerts
Alerts are a key tool for traders to ensure they don’t miss trading opportunities. They also allow traders to manage their time effectively. Who would want to sit in front of the computer all day waiting for a trading opportunity when they could be attending to other matters? In our tool, you currently have two options for receiving alerts:

• Liquidity grabs alert – if you enable this feature and set an alert, the alert will be triggered every time a candle on the current timeframe closes and intersects with the displayed liquidity line.
  
• Entry signals alert – this feature triggers an alert when a signal for entry is generated based on the option you’ve selected in the Entry type. It’s an ideal way to be notified only when a trading opportunity appears according to your predefined rules.