What is liquidity ? How is work the Smart Money Concept?
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Liquidity is one of the most important concepts in Smart Money Concepts (SMC) trading. Understanding it can completely change how you read price action.
What is liquidity in forex? Liquidity refers to areas on the chart where a large number of buy or sell orders are clustered — typically around previous swing highs and lows. Institutional players (banks, hedge funds) deliberately target these areas to fill or close their large positions.
How to identify liquidity levels:
- Look for previous swing highs and lows
- Watch for equal highs and equal lows
- Identify areas where retail stop-losses are likely clustered
Why does this matter for you? When you know where liquidity sits, you can anticipate where price is likely to move before making its next directional move. That's the core of SMC trading: stop trading against the institutions and start following the smart money.
Ready to go deeper? In Pursuit of Liquidity walks you through the full Smart Money Concepts system step by step. [Get the book →]