Liquidity is basically a trap or fail of analysis which happens when a market maker or whales or institutions drags the price opposite to the pattern making retail traders stops hit / liquidated. Liquidity itself in simple can be described as the areas where most of retail traders put there most of the stops.

It usually happens when retail traders get FOMO or FUD, gradually getting in or out of the market placing stops according to their basic Analysis.

In this condition first whales/institutions move the price according to pattern & then suddenly drag the price in opposite directions to grab liquidity or stops. Hence in this condition ride with the liquidity or become a liquidity.

There are basically two types of Liquidity:-

Internal Liquidity:

Internal Liquidity is just a liquidity or stops of retails in shorter timeframe whether they are above or below patterns or above or below recent highs or lows etc.

Some of the examples of Internal Liquidity are as below:-

➢Trend Lines Liquidity:
➢ Double Tops/bottoms Liquidity:

➢ Internal Structure Liquidity:
➢ Patterns Liquidity:


External Liquidity:

Just like internal Liquidity, external Liquidity is stops or liquidity present above or below highs and lows in Higher time frame. There are two types of external Liquidity:

 ➢ Buy Side Liquidity (BSL):

It is the liquidity present at the tops of highs where most of the retails stops are available who short the market.

➢ Sell Side Liquidity (SSL):

It is the liquidity present at the bottoms of lows where most of the retails stops are available who long the market.

Now the question arrives that HOW TO TRADE THE LIQUIDITY?

The answer is just simple, there are two ways to trade:

➢ Target the high probability liquidity areas & take profit in these regions.

➢ Enter the trade only after the sweep of buy side or sell side Liquidity and target opposite liquidity area. (We will learn more deeply about this in next lesson of Range Trading )

Related Queries:

  • Liquidity
  • Liquidity Sweep
  • FOMO
  • FUD
  • Internal Liquidity
  • Trendlines Liquidity
  • Double Tops Liquidity
  • Double Bottoms Liquidity
  • Internal Structure Liquidity
  • Patterns Liquidity
  • External Liquidity
  • Buy Side Liquidity (BSL)
  • Sell Side Liquidity (SSL)  

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