In this brief exchange, Speaker A asks how to define liquidity. Speaker B explains that liquidity consists of resting orders in the market, particularly stop orders and stop‑loss placements. By recognizing where traders are likely to enter at highs or lows, one can infer where clusters of stop orders sit, providing a map of available liquidity. The dialogue emphasizes that understanding the location of these orders is key to anticipating market moves.
How would you go about defining liquidity?
In my opinion, liquidity is just resting orders in the market. Let's just say stop orders. The best example for myself, what I use the most would just again be stop losses. So if I understand certain traders are entering at a high or a low, then I'll understand that there's going to be resting liquidity there.
So essentially just understanding where those orders sit in the market.
Yeah, exactly. If I can just give you another one right here real quick. Simple things like on the uptrend. So since price takes out this high over here, this now tells me the intention behind this move from A to B is now induced buyers into the market, meaning they may think there's momentum. Right. Or they're going to mark this as taking a previous high as like a BOS in the market. Price returns back to this area, the extreme. However they want to look at it as support, Fibonacci, even smart money concepts, they're going to want to buy down here. And once the market moves away, simple things again. Now I know there's liquidity below this low.
