In this THREAD I will explain “Liquidity “

1. Where is the Liquidity?

Liquidity refers to how easily an asset can be bought or sold in the market without affecting its price. In financial markets, liquidity is typically found where there are pending orders—places where buy or sell orders are waiting to be filled. These areas can be identified in the order book or at key price levels, such as support and resistance zones, where traders often set their stop-loss or take-profit orders.

2. Liquidity Sweep

A liquidity sweep happens when price moves to an area where many stop-loss orders or pending orders are located, “sweeping” through them. This can occur when market participants (such as institutional traders) intentionally move price to clear out these orders, creating volatility. After the sweep, price often reverses or accelerates in the opposite direction, once liquidity has been taken.

3. Types of Liquidity

• Buy-side Liquidity: This is the pool of buy orders that exist below the current price, often found near support levels or where stop-loss orders for short positions are placed.
• Sell-side Liquidity: These are the sell orders sitting above the current price, commonly at resistance levels or stop-loss orders for long positions.
• Market Liquidity: This refers to the overall ease with which assets can be traded in the market. High market liquidity means there are plenty of buyers and sellers, while low liquidity means fewer participants, leading to higher volatility.
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