A crucial command for understanding market movements and analyzing opportunities! Here is a simplified and comprehensive explanation:
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💧 1. What is liquidity?
Definition:
Liquidity refers to how easily a financial asset (such as stocks or currencies) can be bought or sold without significantly affecting its price. The higher the liquidity, the faster and more stable the trading.
Practical Examples:
· Buy Stops: Placed above resistance levels or highs.
· Sell Stops: Placed below support levels or lows.
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🛌 2. Resting Liquidity
Definition:
These are pending orders (buy/sell) waiting for execution in the order book.
· This liquidity is consumed when executing market orders or stop orders.
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🌍 3. External Liquidity
Definition:
This is the liquidity present above old highs or below old lows, considered key pivot levels.
📌 Expert Opinion:
· It is preferable not to trade directly at these levels as they are clear and may lead to trapping traders.
· Alternative: trading after a failed breakout or the appearance of an SFP (Swing Failure Pattern).
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🔍 4. Internal Liquidity
Definition:
These are the peaks or troughs that form within the trading range between external pivot levels.
· It can be identified through gaps or single prints.
📌 Expert Opinion:
· It is preferable to trade at these levels as they lead to quick movements (Spikes) and better opportunities.
· Focus on short time frames (15M/30M) and monitor relative volume.
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✅ Summary:
· External liquidity: clear but slow → trading after a failed breakout.
· Internal liquidity: dynamic and fast → suitable for short-term trading.
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#Trading #Liquidity #TechnicalAnalysis #FinancialMarkets 📉📊💹
