What liquidity is
Liquidity is a cluster of other people's orders and stops. Simply put: a place with someone to sell to and someone to buy from.
What liquidity is — what it is?
Liquidity is a cluster of resting orders and stops in a particular area of price. It is what large volume gets filled against.
A large participant cannot buy in a single order: their own buying would push price against them. They need sellers — a lot of them, in one place.
That place is always the same one: where retail traders have put their stops. Beyond levels, beyond candle extremes, beyond channel and pattern boundaries. Price does not go there by accident.
What liquidity is — how it is built?
Marking liquidity boils down to one question: where are the obvious stops. Mark equal highs and lows, the extremes of significant swings, range boundaries and round numbers. That is your map of where the move is headed.
What liquidity is — common mistakes
Looking for liquidity where there is no obvious level. If the crowd cannot see the level, there are no stops behind it.
Treating a liquidity sweep as a reversal in itself.
Marking dozens of pools at once: the nearest and most obvious ones are the ones that matter.
Putting your own stop in exactly the same place as everybody else.
Related to
Glossary
- liquidity
- a cluster of pending orders and stops in a particular zone. The fuel for large capital to move.
- volume
- the number of trades or contracts in a period.
- lot
- the standard unit of size. On forex a full lot is 100,000 units of the base currency.
- candle
- the element of the chart that shows four prices for a period: open, high, low, close.
- channel
- two parallel lines that bound the move above and below.
- equal highs
- two or more highs at the same level. Orders pile up under and above them.
Test yourself
Where was liquidity swept below and price came back?
Correct. The app has tasks like this in every lesson — 119 lessons on real charts. Solve in the app →
Not this one. The right answer is the other chart. The app has tasks like this in every lesson — 119 lessons on real charts. Solve in the app →