This is a term that we see get thrown a lot often in the trading community.
“Waiting for sell-side liquidity to get taken before I go into a long.”
“I want to see a liquidity sweep before entering.”
“Draw on liquidity.”
But what is liquidity exactly?
Answer: It’s just money.
But that won’t give you the full picture.
To truly understand how liquidity works in the markets…
We need to first get to know why liquidity concepts exist in the first place.
One thing that you must understand about the markets is that we’re not the only participants in this game.
We as in retail.
Who only usually have 6 to 7 figures worth of capital to deploy into the markets at any one point.
Sounds like a lot, until you come face-to-face with funds putting in 9 or 10 figures into a single position.
Those funds, or institutions… are what we call the market makers.
Entities that control a large sum of capital and are the only ones capable of moving the markets in a significant fashion.