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Advanced Liquidity

The document discusses advanced liquidity concepts in trading, emphasizing the importance of liquidity as a key factor in financial markets. It outlines different types of liquidity, key concepts such as liquidity pools and inducement, and how institutions utilize liquidity to execute large orders. The document also provides practical tips for traders to avoid common mistakes and effectively master liquidity for profitable trading.

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Manthira Moorthy
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332 views4 pages

Advanced Liquidity

The document discusses advanced liquidity concepts in trading, emphasizing the importance of liquidity as a key factor in financial markets. It outlines different types of liquidity, key concepts such as liquidity pools and inducement, and how institutions utilize liquidity to execute large orders. The document also provides practical tips for traders to avoid common mistakes and effectively master liquidity for profitable trading.

Uploaded by

Manthira Moorthy
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Advanced Liquidity Concepts in Trading

(By Santhakumar)

What is Liquidity in Trading?

Liquidity is the fuel of the financial markets.​


It refers to the availability of orders (buy and sell) in the market.​
Smart Money (institutions) target liquidity to fill their large orders efficiently.

Types of Liquidity:

●​ Buy Side Liquidity (BSL):​


Stop-losses and pending buy orders above recent highs.​

●​ Sell Side Liquidity (SSL):​


Stop-losses and pending sell orders below recent lows.​

●​ Internal Liquidity:​
Liquidity inside a range (between swing highs and lows).​

●​ External Liquidity:​
Liquidity beyond the swing highs or lows (outside range).​

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Key Liquidity Concepts:

1. Liquidity Pools

●​ Areas where multiple stop losses are accumulated.


●​ Often located at Equal Highs/Equal Lows or Round Numbers.

2. Liquidity Sweep (Stop Hunt)

●​ When price spikes into liquidity to trigger stop losses before reversing.
●​ Used by institutions to create liquidity for their own entries.

3. Inducement

●​ Fake moves that trap retail traders into wrong trades before real move
begins.
●​ Example: Breakout fakeout setups.

4. Draw on Liquidity

●​ Price is "drawn" toward the nearest liquidity pool.


●​ Liquidity acts as a magnet to price.

How Institutions Use Liquidity:

●​ Collect Retail Stop Losses​


To provide liquidity for big orders.​

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●​ Create False Breakouts​
To induce wrong-side entries.​

●​ Use Liquidity to Fill OB/FVG​


After liquidity grab, price respects Smart Money levels like Order Blocks (OB)
and Fair Value Gaps (FVG).​

●​ Build and Manipulate Daily Range​


Accumulation > Manipulation > Expansion (Power of 3).​

Important Signs of Liquidity in Charts:

●​ Equal Highs (Double Top) = BSL


●​ Equal Lows (Double Bottom) = SSL
●​ Wicks above/below structure = Liquidity Grabs
●​ Consolidation Breakout = Liquidity Trap
●​ Stop Hunt during Killzone Times (London/New York session)

Practical Application for Traders:

Common Liquidity Mistakes to Avoid:

●​ Setting stop loss just below/above recent highs or lows.


●​ Chasing breakouts without confirmation.

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●​ Trading without understanding where Smart Money is targeting.

Pro Tips to Master Liquidity:

●​ Always think: "Who is trapped here?"


●​ Identify BSL/SSL targets before entering trades.
●​ Use Liquidity with Order Blocks and FVGs for confirmation.
●​ Watch price reaction after liquidity sweep (for strong reversal or
continuation).

Conclusion:

Liquidity is not the enemy — it’s your guide.​


Smart Money hunts liquidity first, then moves price.​
Master liquidity = Master Smart Money Concepts = Master profitable trading!

Watch Full Advanced Liquidity Lesson:

Click here to watch:​


▶️ Liquidity Advanced Video

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