SMC Liquidity Explained Simply
trader’s problem with liquidity
Most Smart Money Concept traders have problems accessing liquidity sources.
🤔This created fear for many beginners about the concept of liquidity and finding it difficult
◾️First - Definition of liquidity 🔍
Liquidity: is large quantities of pending orders in certain places and certain prices on the chart.
◾️Second: Where liquidity lies 🔍
The areas that beginner traders enter from are often the liquidity areas
◾️Third: How whales deal with it 🔍
Market makers, central banks, and financial institutions seek to obtain this liquidity in order for the required move in the market (logically, if we apply it to the #crypto market, the market maker won’t go up and there won’t be a bull run unless he makes you sell him your quantities; you are his fuel; his wallet grows from your loss)
Some of Liquidity areas: 👇🏻👇🏻
Equal highs or equal lows
✅ Any two equal highs or two equal lows are liquidity
An uptrend or a downtrend
✅ Any uptrend or downtrend is liquidity
Who the market maker targets
◾️The regular traders 1,2,3 are the ones targeted by the market maker so he can take them out and enter the market with the liquidity that was grabbed from these 3 areas.
◾️And the ideal entry is from the demand zone marked on the chart.
If you are a beginner, you won’t find an easier explanation than this, and you learned the general concept of liquidity and its simplest forms
Watch this video to learn more about liquidity.
Practical Example + An Important Question 👇
Does breaking a nearby high after a BOS mean the trend flipped bullish, or is it just a liquidity grab?
In this picture 👇
The market was rising
Then a strong bottom was broken → This triggered a BOS and changed the trend to down ✔️ But then an important event occurred 👇
The price rebounded and broke a nearby high (marked by the circles), changing the trend to up, then it fell and broke a strong bottom with the tail.
What happened here is not a trend change ❌
It is just a liquidity grab (Liquidity Grab) ✔️
Why?
Because the break happened on a weak/internal high
This pullback will make the bottom strong because it was able to draw the liquidity from the previous bottom and form a new peak, making it a good place to enter upward trades.
The takeaway you must lock into your mind 👇
Not every break = a trend change
There is a difference between:
A real structure break (Swing Structure) → this changes the trend
Breaking an internal high/low → this is often just a liquidity grab
Tail break = liquidity withdrawal
The market always takes liquidity first…
Then it continues in its real direction
If you want we can continue with the next part(How to practically tell the difference between the real swing and the internal one on the chart step by step) tell me 👌