Collectible card · Epic
Liquidity pools
Areas where many stop losses and pending orders sit: equal highs, equal lows, the previous day high/low, the Asian range.
Why it works
Large orders need the other side to get filled. Stops are that other side, so price is drawn to these levels and often "sweeps" them before the real move.
How to use it
Never put your stop exactly where everybody puts theirs. Place it beyond the pool with some room, and use the opposite pool as a natural target.
The typical mistake
A stop 1 pip below obvious equal lows: it is the first thing the market takes out.
FAQ
What is Liquidity in trading?
Areas where many stop losses and pending orders sit: equal highs, equal lows, the previous day high/low, the Asian range.
How do you trade Liquidity?
Never put your stop exactly where everybody puts theirs. Place it beyond the pool with some room, and use the opposite pool as a natural target.