Liquidity

Question 1

What is liquidity?

Answer 1

Liquidity is pending/resting orders above highs and below lows.

Question 2

When the market is in an uptrend, where is the liquidity?

Answer 2

Liquidity is above recent highs, this is because people trading in accordance with the trend set buy orders just above recent highs so that they can be in profit when the high is pushed above.

Question 3

When the market is in downtrend, where is the liquidity?

Answer 3

When the market is in downtrend, the liquidity lies below recent lows. This is because people place sell orders just below the recent low so that they can be in profit when the low is pushed below.

Question 4

Buys above ——

Answer 4

Highs

Question 5

Sells below ——

Answer 5

Lows

Question 6

What is a liquidity sweep?

Answer 6

Liquidity sweeps are when the market manipulates a high or low within the current trend to fill a massive amount of orders to change the direction of the trend, causing a reversal.

Question 7

How do we identify liquidity sweeps?

Answer 7

Look at the wick that takes out the previous high or low, that is the liquidity sweeper.