Thread on Liquidity and Types of Liquidity 🧵 
Keep it simple. Price moves towards liquidity or imbalances in the market based on time. Trading nowadays almost all of it is fully automated with an algorithm and for algorithms to work it has to run on time first because you have to tell it exactly when to buy and sell.
Liquidity is where people have their buy and sell stops. When you look at a chart the first thing you should ask yourself is "Where is the largest pool of liquidity?"
Large pools of liquidity tend to have EQH/L. You also have trendline liquidity which can make it a Low Resistance Liquidity Run (LRLR) environment. For #TheStrat traders this is your Pivot Machine Gun (PMG) setup and the top & bottom of the broadening formation is BSL or SSL.
Because smart money institutional funds will always draw towards the largest pool of liquidity. That is why 90% of traders fail, because you have to think like them that you are either taking out liquidity aka, you hitting TPs or you are the liquidity aka your stop is getting hit
Because we are not part of the algorithm no single traders knows 100% where price is going to go all the time but that's okay because all you need is 50% Win Rate with 2r system to do very well in this business.
But as traders we are natural born competitors so the goal is always to get better each day to improve WR and RR over time.
There are different types of liquidity.
Buy stops = Buyside Liquidity (BSL)
Sell stops = Sellside Liquidity (SSL)
This is based on where price is currently at so BSL is above current price and SSL is below.
cont..
Buy stops = Buyside Liquidity (BSL)
Sell stops = Sellside Liquidity (SSL)
This is based on where price is currently at so BSL is above current price and SSL is below.
cont..
Liquidity on charts are the highs and lows that you see form. BSL are the highs and SSL are the lows. With these highs and lows that form it creates External and Internal Liquidity and this will depend on the timeframe that you're looking at.
There are 3 different types/levels of liquidity.
1. Major
2. Medium
3. Minor
1. Major
2. Medium
3. Minor
Major Liquidity is buy & sell stops that form at the highs and lows of each session, day, week, and monthly timeframe charts. Use the weekly, monthly, quarterly, and yearly charts to build a HTF bias and look at daily for where you think the largest pool of liquidity is.
Medium Liquidity is buy & sell stops that form at the highs and lows on the M15, H1 charts. These two timeframes are also the best in my opinion to look at when it comes to market structure for day traders. I dont use M30, H2, H4 charts as much as M15, H1.
Minor Liquidity is buy & sell stops that form at the highs and lows on M1-M5 charts. The M1-M5 LTF often has 'fu' stop hunts after medium or major liquidity is swept, raided or whatever you wanna call it. Once liquidity is taken you're then looking for the market structure shift.
Thread on Market Structure and Market Structure Shift will come soon so follow and turn on notifications!
Entries for me don't happen without a raid on BSL or SSL liquidity or raid on a Fair Value Gap or Orderblock which I will discuss those two in a different thread as well. After the raid there has to be a market structure shift before I look at the different entry models.
And BEFORE you even enter the trade you need to have already established where you think the next largest pool of liquidity is, and if price will draw there today or not.
So if I know where the next Draw on Liquidity is, my Take Profits are placed at either External/Internal Liquidity or at Fair Value Gaps along the way of the DOL is and I make sure I place my stop correctly. I will also do thread on SL placement.
Before SL and TP is placed I check to see if the RR is 2r or higher. If it is then my limit order is placed. If the setup is less than 2r I check one more time to see if I can adjust entry to make it a 2r setup. It's better to have a tighter entry rather than a tighter stop.
Make any adjustments if needed and if it's still not 2r then I dont take the setup. There will be times where I know where the draw on liquidity is but it doesn't give me a 2r setup so I wont even bother looking at it because it doesn't fit my system.
So for this example EQH @ Old Daily Highs was a D TF fu raid on BSL for major liquidity raid. That M15/M5 fu raid is a medium/minor liquidity raid. Then you get MSS and M5 IOFED to sweep internal SSL at London low. PDL was External DOL. Price went quickly to it because LRLR + EQL
If this thread helped and brought value to you please like and retweet for more education threads and for others to see. Thank you.
Here is more educational content that I have made:
https://twitter.com/Dangstrat/status/1637848935938109442?s=20
If you're interested in following along closely to my trading journey here is a link to my Discord: launchpass.com/dangstrat/gold
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