INTRODUCTION TO
LIQUIDITY
. Liquidity is the ability of a currency pair to be traded (bought/sold) on demand.
• A market is liquid when there is a constant flow and participation of Buyers and Sellers.Anyone can come in at any time and sell
his commodity/asset.
• Forex is one of the most liquid markets. Real estate is one of the most illiquid markets.
• The concept of Liquidity is CRUCIAL, because it is what drives the market and helps BFIs execute their orders.
• For us (retail traders), liquidity is not a problem.We open our platform anytime and can take our 1-100 lot/contract trades.
• Imagine being a Bank, opening their platform and trying to place a buy with 10k lots/contracts and the platform says:‘’Not enough
liquidity available to execute your order.’’.
• So, the Bank has to wait for more liquidity, generate its own, or drive price towards ‘’liquidity pools’’. Remember where liquidity is?
. Liquidity points are used by BFI to get enough counter orders to theirs, so their order can get filled.
• This is done by taking other people’s Stop Losses, Limit Orders, Stop Orders, and Tricking them into Buying and Selling.
. Mindset Shift is required.When you see a DT – mark it as LQ point.When you see flat, choppy price – mark it as
LQ.
. Liquidity Grabs (LG) are a ‘’recharge mechanism’’. Market cannot be pushing up/down forever – it needs liquidity to
recharge.That’s why we get pullbacks, formations and liquidity points, that are mainly ‘’engineered’’ by BFIs.
LIQUIDITY
TYPES
• There are many forms of Liquidity.The key is to KISS (simple and systematic)
• Above any High and Below any Low. (Why? Stop Losses and Stop Orders.)
• Equal Highs (EQHs) and Equal Lows (EQLs). Usually we see them as DTs, DBs,
Ranges.
• Structural (S&D) Liquidity – Old S&D zones or Structural Levels.
• Fake Trend Change.
• Trendline Liquidity – slow and corrective trending structure. (subjective)
• Flat Highs and Lows fall under this category.
• Flags and Channels.
HIGHS AND LOWS
LIQUIDITY
• Every High and Low has Liquidity.
• A Single High or Low.
• Equal Highs and Lows.
• Remember, HTF matters the most!A High/Low on a HTF matters more than on the LTF.
HIGHS AND LOWS LIQUIDITY - EXAMPLE
HIGHS AND LOWS LIQUIDITY - EXAMPLE
HIGHS AND LOWS LIQUIDITY - EXAMPLE
STRUCTURAL
LQ
• Those are Old Structural Levels (HLs/HHs/LHs/LLs) and/or Supply and Demand Zones.
• Many traders refine too much, do not follow the trend and end up becoming Liquidity to those levels.
STRUCTURAL
LQ
STRUCTURAL LQ -
EXAMPLE
STRUCTURAL LQ -
EXAMPLE
FAKE
TC
• That is a Fake Trend Change, that tricks traders into Buying/Selling, before Liquidity is
generated.
FAKE TC -
EXAMPLE
FAKE TC -
EXAMPLE
FLAT HIGHS AND LOWS
LQ
• Flat price is simple, yet a bit subjective.
• Slowly moving price, corrective in nature, still making structure, but in a very choppy manner.
• Trendline Liquidity – ascending/descending corrective price. Depending on the direction – it can either be used as
Inducement or for Targets.
FLAT HIGHS AND LOWS
LQ
FLAT HIGHS AND LOWS
LQ
LIQUIDITY GRAB
(LG)
• The Liquidity Grab is a CRUCIAL concept!
• Also called Sweep, Stop Hunt, Liquidation, Manipulation.
• A LG is a Stop Hunt. Simply, a break of any Liquidity Point we just covered.
• This takes LQ and then launches order in the opposite side. Usually, after a LG, price will sharply reject and reverse.
• A LG should be usually followed with a large influx of momentum. No Momentum – not enough LQ has been gathered.
• That’s BFI launching fake orders to take out SLs.A LG can be retested, but it shouldn’t break.
• LGs are on all timeframes. The concept is Fractal.
• LG on HTF (4H/15M) will signify a strong zone created.An S&D zone that made a LG is stronger!
• LG on LTF (1M) signifies liquidation and stopping out early buyers/sellers.
• Include LGs in your Trading Plan.
• Decide on which LQ points you are going to use.Add them to your Strategy.
• Always wait for the LG. Else – you will be the liquidity.
ADDITIONAL CONCEPTS – THE
DAILY RANGE (2 PROFILES)
ADDITIONAL CONCEPTS – THE
ASIAN RANGE (4 PROFILES)
