Kardec Trader breaks down three liquidity concepts: external range liquidity at swing highs and lows, internal range liquidity within the trading range, and how price oscillates between them. The strategy trades the flow between these liquidity pockets.
I'm going to be talking about three different things when it comes to liquidity. First is your external range liquidity. This is simply liquidity that occurs outside of the trading range. So this is your trading range. Let's say from here to here. Any liquidity that forms outside of this range is external. Any liquidity that forms within this range is internal. For simplicity's sake, external range liquidity is going to be swing highs and swing lows that are outside of your current trading rate. Internal range liquidity is just going to be a poi. The last thing about liquidity, liquidity we're going to talk about is the draw on liquidity. Draw on liquidity simply means that, okay, if price ran below a swing low, where is it next likely to go? Okay, it's going to go over to some swing high, and it just bounces between liquidity to liquidity. So if I filled a bunch of longs here, where do I want to sell off those longs? I want to sell them off way up there. And the framework that I use here is we're going to be bouncing from external range to internal, back to external. Just going to be this kind of oscillation. Price moves from one area of liquidity to the next. And that is all you really need to know when it comes to liquidity.
