Liquidity Concepts Deep Dive
Liquidity is the fuel that moves markets.
Types of Liquidity
Buy-Side Liquidity
- Stop losses from shorts
- Located above highs
- Attracts price upward
Sell-Side Liquidity
- Stop losses from longs
- Located below lows
- Attracts price downward
Liquidity Pools
Equal Highs
- Multiple touches of same level
- Stops cluster just above
- Magnet for price
Equal Lows
- Same concept below
- Stops cluster just below
PDH/PDL
- Previous day high/low
- Frequently targeted
Trading Liquidity Sweeps
The Setup
- Clear liquidity pool
- Price approaches
- Quick spike through (sweep)
- Immediate reversal
- Entry on confirmation
Entry Rules
- Enter AFTER sweep
- Wait for reversal
- Stop beyond wick
- Target opposite liquidity
Key Rules
- Price seeks liquidity
- Trade AFTER liquidity taken
- Obvious levels get swept
- Opposite liquidity = target