the hidden
language of the market
liquidity is the hidden language of the market. Mastering it means you can:
1. Spot where big players enter and exit
2. Understand stop hunts and fakeouts
3. Identify where price is drawn to (liquidity pools)
4. Time entries with precision at liquidity sweeps
Retail traders chase price… Pros wait at liquidity. Master that game, and you're no longer reacting —
you're predicting.!!!
A pro-level breakdown of liquidity in trading,
including how to read it, use it, and profit from it.
1. What Is Liquidity?
Liquidity = Orders waiting to be triggered
It’s where the most volume lies — either:
Resting orders (like stop-losses or pending orders), or
Market orders entering during a breakout or sweep.
Think: “Where is the crowd wrong, and where will price go to fill big orders?”
2. Types of Liquidity Zones
A. Equal Highs / Equal Lows (Double Tops/Bottoms)
Retail trap: Traders think it's resistance/support.
Pro insight: These are liquidity magnets — price often sweeps above/below then
reverses.
B. Trendline Liquidity
Multiple touches = buildup of stop-losses below/above.
Price will eventually break through to grab those.
C. Consolidation Ranges
Stops are stacked on both sides.
Price fakes one side, then moves in the opposite direction.
3. How Price Uses Liquidity
Smart money (banks/institutions) can’t enter a full position without liquidity.
So they:
Drive price into retail stop zones (liquidity pools),
Fill large orders there,
Then reverse the market once they've gotten in.
4. Liquidity Sweep + Reversal Strategy (Pro Setup)
Step-by-Step:
1. Identify liquidity pool (equal highs/lows, trendline breaks, obvious
support/resistance)
2. Wait for price to sweep the liquidity
3. Look for a shift in market structure (e.g., break of lower timeframe BOS)
4. Enter on the retest or confirmation (engulfing candle, pin bar, etc.)
5. SL below/above the sweep, TP at next liquidity zone
5. Add More Power with Confluences
Combine with:
Fibonacci retracement zones
EMA dynamic support/resistance
Supply & demand zones
Higher timeframe trend bias
Example (Visual in Words):
Price forms equal highs on the 1H chart.
Retail traders short again from the top.
Price spikes above those highs, grabbing stop-losses.
Then it engulfs downward, breaking 15m structure.
That’s your entry — ride it down to the next demand zone.
"Is understanding liquidity about identifying potential price rejection points and
strategically waiting for price to break past these areas before entering trades near
new potential rejection zones?"
Yes, that's a key aspect of understanding liquidity in trading. Identifying potential
price rejection points and waiting for price to break past these areas can help traders
make more informed decisions and potentially improve their trading outcomes.
Here's how that works 💪
Understanding liquidity involves recognizing areas where buyers or sellers are likely
to participate in the market. These areas, often referred to as liquidity zones, can
include:
1. *Support and resistance levels*: Price levels where buying or selling interest is
strong enough to potentially reverse or pause the price movement.
2. *Order blocks*: Areas where significant buying or selling orders are clustered,
which can influence price movement.
3. *Liquidity pools*: Areas where market participants tend to place orders, such as
previous highs or lows, round numbers, or other technical levels.
Traders who understand liquidity might:
1. *Identify potential price rejection points*: Recognize areas where price might
struggle to break through or might reverse.
2. *Wait for price to break past these areas*: Look for price to break through a
liquidity zone, indicating a potential shift in market direction.
3. *Enter trades near new potential rejection zones*: After price breaks past a
liquidity zone, look to enter trades near the next potential rejection zone, such as the
next support or resistance level.
By understanding liquidity and how it affects price movement, traders can make
more informed decisions about when to enter or exit trades, and potentially improve
their trading outcomes.
That's the deep truths about liquidity.
Liquidity Trading Is NOT About Rejection. It's About Reaction After the Manipulation.
Let’s uunpack it!
"Liquidity is about knowing potential price rejection points..."
Yes — but not because we expect price to reject them directly.
We watch those zones because they:
Hold stop-losses (liquidity)
Act as magnets for price
Represent where retail traders are trapped
"...and not trading from there..."
Correct — pros don’t just place sell limits at resistance or buy at support.
They wait for:
Price to break through the level (liquidity sweep)
Trap traders
Shift structure
"...but intentionally waiting for price to break past the point..."
This is the key. Price breaks through liquidity levels to grab orders, not because it
wants to break out.
Once the sweep is done, you:
Enter after the reaction (wick rejection, structure shift)
Often far from stop-loss clusters
With precision — not fear
"...then entering when price wicks below/above or in/out of the zone..."
Yes — this is the “liquidity sweep + fakeout + confirm” model:
1. Price wicks into stop-loss zone (outside structure)
2. Prints a strong reversal wick or engulfing
3. Re-enters inside the old range or confirms a BOS
4. You enter far from where others got stopped out
Pro Entry Model (Visual Description):
Price forms a clear resistance at 0.49912
You expect the sweep to 0.50305
After the sweep:
Price wicks up, hits stops
Then closes back below 0.49912
Market structure breaks on 15m/1H
Enter short
Your SL is above the wick, not the obvious zone
Your TP is where liquidity lies below
Mechanics of a Liquidity Sweep
How the Sweep Happens:
1. Price approaches a known liquidity zone
2. Volume spikes as stops are triggered
3. Price moves through the level, faking a breakout
4. Institutional players fill their orders
5. Price reverses hard — creating a stop hunt wick
5. Types of Sweeps
A. Stop-Loss Sweep (Classic)
Price takes out SLs just before reversing
B. Fake Breakout Sweep
Breaks key level, traps breakout traders, reverses
C. Wick Sweep (Pin Bar Entry)
Quick spike above/below a level — leaving a long wick
---
6. How to Trade a Liquidity Sweep
Step-by-Step Trading Plan:
Step 1: Identify a Liquidity Pool
Equal highs/lows
Obvious support/resistance
Clean trendlines
Step 2: Wait for the Sweep
Price must spike into the liquidity zone
Usually a wick or strong candle breaks through
Step 3: Watch for Rejection
Look for:
Pin bar
Engulfing candle
Doji
Shift in structure (BOS)
Step 4: Confirm Market Structure Shift
On 15m / 1H: BOS confirms change in trend
HL → LH → BOS = sign of reversal
Step 5: Enter After Confirmation
Entry after structure shift or retest
SL above wick (not above original zone)
TP at next demand/supply or liquidity pool
7. Best Confluences for Liquidity Sweeps
Combine with:
Higher timeframe bias (Daily, 4H)
EMA zones (dynamic S/R)
Fibonacci levels (61.8%, 78.6%)
Order blocks / Supply-Demand zones
Volume spikes / divergence
8. Common Mistakes to Avoid
Entering too early before sweep is complete
Confusing real breakouts with sweeps
Not confirming with structure shift
Using tight stop-loss near liquidity
9. Advanced Sweep Concepts
A. Internal vs External Liquidity
Internal: Liquidity inside the range (e.g., trendline touches)
External: Liquidity outside the range (e.g., above equal highs)
B. Breaker Blocks
After a sweep and reversal, the origin candle becomes a breaker zone for entries
C. Liquidity Voids (Imbalances)
Sweeps often create imbalance → price returns to fill it later
10. Example Trade (Bearish Sweep)
Equal highs at 0.7990
Liquidity zone = 0.8030
Price sweeps 0.8035
Prints bearish engulfing on 15M
BOS occurs at 0.7985
Entry: 0.7990 (retest)
SL: 0.8045
TP1: 0.7900
TP2: 0.7840 (next demand zone)
Who are The market markers ?
Market makers are large financial institutions or entities (like banks, hedge funds, and proprietary
trading firms) that provide liquidity to the markets by constantly quoting both buy (bid) and sell (ask)
prices.
They "make the market" by:
Always being ready to buy when others are selling.
Always being ready to sell when others are buying.
Examples of Market Makers:
JPMorgan Chase
Citadel Securities
Goldman Sachs
Barclays
XTX Markets
Virtu Financial
Deutsche Bank
UBS
Their Role in Price Movement:
Market makers:
Facilitate trades — especially for large orders.
Hunt liquidity — they push price toward stop-loss zones to find volume for filling large orders.
Exploit inefficiencies — they profit from spreads and temporary price imbalances.
Often trap retail traders with fakeouts, sweeps, or range breaks.
They’re Not Evil — Just Efficient
They don't hate retail traders.
They just do what’s needed to fill big orders.
If retail traders leave clues (like stop-loss clusters), market makers will use them to fill institutional-
sized positions.
How Market Makers moves price through liquidity
Scenario: Market Maker Liquidity Sweep + Reversal Trap (Sell Setup)
1. Setup: Price in a Downtrend
4H and 15M show bearish market structure.
Price pulls back to a visible resistance zone (or 4H supply).
Retail traders place sell orders early — but MM isn’t done yet.
2. The Trap Begins: False Breakout
Price pushes above recent highs (liquidity pool).
This triggers:
Buy stops (from early sellers getting stopped out).
Breakout buyers jumping in expecting continuation.
MM’s Goal: Collect their liquidity to build short positions.
3. The Sweep: Reversal Candle
After grabbing liquidity, price prints:
A bearish engulfing / pin bar on 15M or 5M.
Volume spikes or wicks indicate rejection
This is the true signal — not the breakout.
4. Market Structure Shift (CHoCH on 15M):
Price breaks below the last 15M higher low.
Confirming the change of character.
Now, the MM is in profit, and smart traders sell the retest of that break.
5. The Dump: Impulse Down
Price accelerates lower.
Retail breakout buyers panic and exit.
Early sellers who got stopped may re-enter — too late.
Key Smart Money Concepts Used:
Liquidity Pool above highs
Inducement (fake move to pull in liquidity)
CHoCH after sweep
Sell on retracement (ideally 61.8% fib + bearish candle + EMA alignment)
Market makers don't intentionally target retailers to hurt them... but losses are a side
effect of what they must do.
Here’s why:
1. Their Goal Is NOT to “Hurt” Retail Traders
They don’t care who loses, they care about filling massive orders efficiently.
Institutions need to buy/sell millions of units — and for that, they need liquidity.
Most liquidity lies above highs or below lows (where retailers put stop-losses or
breakout orders).
2. Retailers Just Happen to Be in the Way
Retail traders often:
Buy at resistance
Sell at support
Put stops in predictable places (above equal highs, below trendlines, under swing
lows)
Market makers see those areas as easy pools of liquidity.
When they sweep them to fill orders, retail gets stopped out — not out of malice, but as
a byproduct.
3. Market Makers Exploit Predictability, Not People
It’s not personal — it’s systematic.
If 100,000 traders place SLs at 0.8000, and a hedge fund needs buyers to sell into...
They’ll push price up to 0.8000+, trigger those stops (which become market buys), then
fill their sell orders.
Then price often reverses, leaving retail with losses.
How Market Makers see the market 🤔
They don't see it as too low or high to buy or sell , but not fine enough or large for
liquidity instead little for them ?
How Market Makers Actually See Price:
1. They Don’t See Price as "Too High" or "Too Low" Like Retail Traders Do
They don’t think in terms of overbought or oversold.
They think: “Is there enough liquidity here to enter/exit a large position without
slippage?”
---
2. They Look for Liquidity — Not "Deals"
A price level is attractive only if:
It has lots of stop-loss orders (to buy into or sell into).
It has clusters of pending orders (limit buys/sells).
It allows them to enter/exit without causing huge price impact.
---
3. Why They Push Price Into "Obvious" Levels
Retail traders place:
Buy stops above highs
Sell stops below lows
Market makers push price into those zones to:
Trigger those orders
Create artificial volume
Fill their real position (the opposite direction)
4. Liquidity Is Often Too Small at "Safe" Prices
If price is consolidating or sitting at a support/resistance:
Liquidity is low (nobody wants to trade there)
Market makers can’t fill big orders
So they cause a fake breakout to trigger volume
Then reverse the price into their intended direction
Market Makers Don’t Care if Price is “Too High or Too Low”
They care about one thing:
> “Can I fill my massive buy/sell order here without moving the market against
myself?”
---
So What Do They Look For?
1. Areas With High Liquidity (Their Targets)
Equal highs/lows
Obvious support/resistance
Trendline touches
Order block edges
Round numbers (0.8000, 1.0000, etc.)
