Liquidity

Liquidity, in this style of trading, means resting orders that can be traded against. The practical places are obvious. Buy stops sit above a clear high. Sell stops sit below a clear low. Limit orders sit at a range edge, at a round number, at yesterday's high. A pool of liquidity is just a price where many of those orders are plausibly stacked because many traders can see the same swing. The market does move toward obvious stops often enough that the pattern of a sweep and a reverse is worth knowing. It does not move there because a diagram required it. Sometimes the stops are the fuel for a continuation, not for a reversal. A breakout through a high is liquidity being consumed in the direction of the trend.

Mark equal highs, equal lows, a single obvious swing, and the session high and low. Those are your pools. Then watch the interaction. A wick through the pool and a close back inside is a sweep. A close through the pool, with follow-through, is a breakout. Both consume the resting orders. The difference is what price does after. Planning as if every pool will be swept and reverse will get you run over on trend days. Planning as if every break of a high will continue will get you faded to death in a range. The close is the distinction.

Use liquidity pools as targets. If you are long into equal highs, the highs are where your trade gets paid and where it also becomes dangerous, because that is where the other side expects a sweep. Take something off into the pool instead of assuming you will be the one who catches the reversal. Use a confirmed sweep, a pierce and a close back inside, as an entry condition only at a location the higher timeframe already justified.

Drawing liquidity everywhere so that any future print "took liquidity." If every high is a pool, the word no longer filters anything. Also believing you know the stops are there. You are guessing from the chart's obviousness, which is a good guess and still a guess. And calling your own stop a liquidity grab when it was simply on the wrong side of a level.

Visible swings are not the only liquidity. Iceberg orders, options hedges, and the closing auction do not announce themselves as equal highs. A liquidity map made only of candle wicks misses the largest prints of the day. And once a pool is taken, it is gone. Reusing yesterday's swept high as if the stops were still there is trading a memory.