Manipulation Liquidity Bounce
The MLB strategy is predicated on the assumption large market participants manipulate price just outside ranges or trend lines to grab liquidity from stop-losses before carrying on with a trend. Once stop-losses are triggered, these large players use the liquidity to fill their orders without bidding up the price too much and price returns to the range for a continuation of the trend or a strong move beyond the original trend.
After the manipulation and initial impulse back to the range, price should hopefully return to the liquidity zone formed around the manipulation. This means you are not trying to trade the manipulation itself or the move immediately after, rather, you are waiting to trade the retest of the zone where the liquidity is if/when price retraces back to it.
Identifying the liquidity zone will likely be the trickiest part as it is not always cut and dry. Often times it is right above the manipulation candles, but you will have to use your best judgment. You can use the wicks adjacent to the manipulation candle back toward the range (green candle in the yellow box in the above picture) as a general guide for where the zone likely is. You can also look to the Fair Value Gap strategy to identify your zones when applicable.
Once price pushes back into the range, you will want to watch for a retracement back to your liquidity zone so you can enter your position. Retracements can be relatively quick like the one in the attached picture, but they can also take hours to return back to the zone before shooting back up, so be patient and don’t FOMO in any trades or try to chase. Sometimes price will never return to your zone and that’s okay. It’s all about the quality setups and you’re going to have to let some trades go that don’t hit your triggers if you want consistent results. Discipline is key.
Your stop-loss should be just beyond the low point of the manipulation candle(s) and your take profit should be at the most recent area of substantial resistance/liquidity. Trailing your stop every time price moves up one R is also an acceptable approach. R is your risk or distance from your entry to your stop-loss so one R would be the red portion of the ‘Long Position’ figure outlining the trade in the picture.