Liquidity Pools: A Short Explainer
A liquidity pool is an area where retail traders have pending buy/sell orders.
MM always needs to pair their buys with someone's sells, and vice versa - they 'engineer' liquidity.
If they want to go long, they create conditions whereby retail traders think the price is going lower.
If they want to go short, they create conditions whereby retail traders think the price is going higher
Price dips into liquidity pool (see the wick)
Reverses
Driving price below the swing low floods the market with liquidity for longs
How?
1. People who are long and have stops --> stops triggered --> stops become market orders to buy
2. Retail traders see 'support breaking' -> open shorts > MM sell their longs to them
Liquidity pool below the swing low
Swing lows & equal lows are high probability long liquidity pools
Market makers will target these price levels knowing
1. Retail traders already long have their stop-losses at/around swing lows
2. Swing lows seen as 'support' by retail traders
A liquidity pool is an area where retail traders have pending buy/sell orders.
MM always needs to pair their buys with someone's sells, and vice versa - they 'engineer' liquidity.
If they want to go long, they create conditions whereby retail traders think the price is going lower.
If they want to go short, they create conditions whereby retail traders think the price is going higher
Price dips into liquidity pool (see the wick)
Reverses
Driving price below the swing low floods the market with liquidity for longs
How?
1. People who are long and have stops --> stops triggered --> stops become market orders to buy
2. Retail traders see 'support breaking' -> open shorts > MM sell their longs to them
Liquidity pool below the swing low
Swing lows & equal lows are high probability long liquidity pools
Market makers will target these price levels knowing
1. Retail traders already long have their stop-losses at/around swing lows
2. Swing lows seen as 'support' by retail traders
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Join the Crypto Trading Tournament ICTI 2025
whitebit.com/a/excavo
Trade Forex
go.tradenation.com/visit/?bta=37220&brand=tradenation
All info
excavo.carrd.co/
t.me/EXCAVOACADEMY
t.me/excavochannel
whitebit.com/a/excavo
Trade Forex
go.tradenation.com/visit/?bta=37220&brand=tradenation
All info
excavo.carrd.co/
t.me/EXCAVOACADEMY
t.me/excavochannel
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.