Trend liquidity
In a trend, stops pile up behind every pullback. That is why price moves in bursts rather than a straight line.
Trend liquidity — what it is?
Trend liquidity is stops that accumulate along a move rather than at a single point. In an uptrend it is the buyers' stops under every local low.
Each new HL adds another layer of orders. What you get is a staircase: not one pool but a chain of small clusters running the length of the move.
Hence the typical mechanics of a correction. Price does not simply pull back, it strips those layers one after another, taking out the stops of everyone who entered with the trend.
Trend liquidity — how it is built?
Mark it off local extremes inside the trend, not off the major swings. Useful for two things: understanding how far a pullback can reach, and keeping your own stop off the common staircase.
Trend liquidity — common mistakes
Treating every layer taken out as a reversal.
Putting your stop right under the last HL, alongside everyone else.
Marking trend liquidity in a range, where there is no trend.
Confusing it with stop-loss liquidity beyond major levels: the scale is different.
Related to
Glossary
- trend
- a steady directional move in price.
- liquidity
- a cluster of pending orders and stops in a particular zone. The fuel for large capital to move.
- point
- the minimum step of a quote, usually ten times smaller than a pip.
- uptrend
- a sequence of higher highs and higher lows.
- low
- the lowest price of the period.
- pullback
- a corrective move inside the trend.