Understanding

Liquidities
For Synthetic/Volatility indices & Currencies

#This eBook is FREE

Institutional Trader
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www.institutional-trader.com

Understanding Liquidity | Institutional Trader

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Table of contents

DISCLAIMER 4

What is Liquidity? 5

So, who do you think are the liquidity providers? 6

Types of Market Liquidity 6

a) Buy Stops Liquidity [BSL] 6
b) Sell Stops Liquidity [SSL] 7

Trading Liquidity (Sharp Entry Setup) 8

Liquidity inducement 8

Conclusion 12

Essential Links 13

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DISCLAIMER
IDEAS & STRATEGIES SHARED IN
THIS PRIMER ARE INTENDED AS
EDUCATIONAL INFORMATION ONLY
& ARE NOT INTENDED AS
INVESTMENT ADVICE.
YOU CAN IMPLEMENT THEM WHILE
TRADING AT YOUR OWN RISK.

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Trading the Forex market can be fun if you know how to follow the market maker's
footprints.

But how do you do that?

One of the best ways is to spot where liquidity is receding.

In this Understanding Liquidity article, we will not focus much on detailed liquidity, but just to
show you how you can spot high probability setups based on market behavior in line with
liquidity.

What is Liquidity?

In the simplest way possible, liquidity is a measure of the ease of ability to enter and exit a
market at the desired price based on the number of buyers (bids) and sellers (asks/offers) in that
market, without creating a major impact on the same market.

The primary objectives of the market marker in respect to liquidity are;

To make a market by buying and selling from their own inventory, when public orders to buy or
sell the assets are absent.

To keep the market book of orders, consisting of limited orders to buy and sell, as well as stop
orders placed by the general market participants.

A financial asset is regarded as having a high level of liquidity when you can easily buy or sell it,
and there is a significant amount of trading activity for that asset.

Generally, if you understand these two points, you will know how the big boys make fakeouts
and induce retail traders to fake moves. Check the charts below.

Who Provides Liquidity to the Forex Market?

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So, who do you think are the liquidity providers?

Liquidity providers are market participants including;

Commercial banks such as Citibank, Deutsche Bank, Societe Generale, Union Bank of
Switzerland and HSBC.

● Central Banks
● Investment Firms
● Retail Forex Brokers
● Speculators
● Algorithmic Traders

Types of Market Liquidity

a) Buy Stops Liquidity [BSL]

The BSL is a pool of Buy Stop orders with their respective Stop Losses.

When BSL is taken out (Buy Stops activated), the market reverses to the downside (clearing the

Stop Loss orders).

Where to spot BSL?

● Previous Month High [PMH]

● Previous Week High [PWH]
● Previous Day High [PDH]
● High of Day [HOD]
● Old High/Swing High

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● Equal Highs [EQH]/Resistance

b) Sell Stops Liquidity [SSL]

The SSL is a pool of Sell Stop orders with their respective Stop Losses.

When SSL is taken out (Sell Stops activated), the market reverses to the UPside (clearing the

Stop Loss orders).

Where to spot SSL?

● Previous Month Low [PML]

● Previous Week Low [PWL]
● Previous Day Low [PDL]
● High of Day [HOD]
● Old Low/Swing Low
● Equal Low [EQL]/Support

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Trading Liquidity (Sharp Entry Setup)

So, when do we trade liquidity?

Spotting liquidity at the right place and at the right time is essential for your trading setup.

Liquidity inducement

Liquidity inducement is a trap of liquidity before the Supply or Demand Zone. Price will
[mostly] lure impatient traders (buyers or sellers) into the market before the zone is met to create

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liquidity. Once the impatient traders get trapped and stopped out, the true movement begins.

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So, if price approaches your HTF key zone, it's possible to switch to LTF and spot these liquidity
inducement setup patterns.

The most essential thing to understand here is you need to be keen when spotting these
inducements...I like it when it happens near the Flip Zone, whether the market is reversing or
making continuation.

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Conclusion

Liquidity affects market volatility and, although volatility can be a friend or foe, a certain level
of volatility is necessary for trading opportunities. Illiquidity can lead to wild price swings and
unmanageable fluctuations.

To be a successful trader, it is important to manage the risk and volatility. Getting a grasp of
these two factors starts with understanding liquidity.

Sign up for a demo account and practice this strategy on Synthetic/Volatility Indices and
Forex/Currencies.

Understanding Liquidity | Institutional Trader

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Essential Links
FOREX Syllabus >> https://t.me/joinchat/VJk8Lms0UEbBs54V

ICT Simplified >> https://t.me/joinchat/k1GVYVhh8GtmNWU0

Market Structure >> https://t.me/MarketStructure_MS

FOREX updates >> https://t.me/+2KcmemOroUdlYmJk

Deriv/Volatility/Synthetic >>
https://track.deriv.com/_MlxnNQr550a2vdm9PpHVCmNd7ZgqdRLk/1/

Forex/Currencies/Gold/Nasdaq >> https://clicks.pipaffiliates.com/c?c=642002&l=en&p=1

Understanding Liquidity | Institutional Trader