What is LPS - Guide to distinguish successful and failed signals in BTC trading

In recent weeks, BTC has experienced notable fluctuations, rising from the 83k-85k range up to 87.4k, then continuing to touch the 110k level. But before you can seize trading opportunities, you need to understand an important concept: What is LPS and how to distinguish whether it will succeed or fail. This is the key to helping you identify optimal entry points when monitoring BTC price movements.

Definition of LPS - Understanding what LPS is in technical analysis

LPS (Liquidity Provider Squeeze - or “test the top” in common terminology) is the process where institutions accumulate capital at specific price zones to create momentum that pushes the price up or down. Simply put, this is the phase where large traders “suck” liquidity from retail traders before initiating a major move.

The concept of what LPS is not only a technical term but also a tool to read the intentions of institutions. When you learn how to recognize LPS, you will have an advantage in predicting the next direction of the price.

Successful LPS - When capital flow maintains continuous buying pressure

A successful LPS is a phenomenon where, during capital accumulation, no strong selling pressure appears from institutions at higher resistance zones. This means that capital continues to flow in, and the price keeps rising without significant obstacles.

Specifically, on January 15-16, 2025, the BTC market showed two consecutive successful LPS phases. During these periods, capital kept flowing in, causing BTC price to rise from the 83k zone to 87.4k without a major sell-off. After completing these two LPS phases, BTC entered a very strong bullish trend, eventually reaching the 110k zone.

Signs of a successful LPS include: gradually increasing trading volume, no sudden decline, and the price maintaining a stable upward trend.

Failed LPS - Warning signals from sudden selling pressure

Conversely, a failed LPS occurs when, at resistance zones or areas with exhausted liquidity, a very strong selling pressure suddenly appears from institutions. This sell-off happens immediately after the LPS, causing BTC to drop back to support levels or even lower.

A clear example is on January 7, 2025, or December 17, 2024. At these times, after LPS phases, a very strong sell-off formed at higher price levels, causing BTC to sharply decline to support levels.

Warning signs of a failed LPS include: sudden appearance of doji candles or reversal candles, a spike in trading volume, and the price failing to break through resistance zones.

Practical application - How to identify the optimal entry point

Currently, BTC is approaching the resistance zone of 88k-89k. To determine whether this is a good trading opportunity, you need to observe whether there is strong selling pressure at this resistance. If capital continues to flow in and the price breaks through strongly without signs of a sell-off, it indicates a successful LPS, opening a buying opportunity.

Conversely, if strong selling pressure appears at the 88k-89k zone, it signals a failed LPS, suggesting you should reconsider your position.

The latest update shows BTC is currently at $70.81K, down 7.49% in the past 24 hours. This data indicates the market is in a correction phase, making recognizing LPS even more crucial than ever.

In summary, being able to distinguish what LPS is and how to identify successful or failed LPS will become a powerful tool to help you make more accurate trading decisions. Pay close attention to these signals to seize the best opportunities.