Market Liquidity

Relative equal lows are presented as a stronger liquidity draw than old highs and lows alone. Liquidity is the actual tradeable volume available at specific price levels. A correct understanding of price action requires considering liquidity sources and institutional hedging strategies together. Liquidity enables price movement and trade execution. Underlying liquidity demand from the options market is a driver of short-term price action. Market makers and liquidity providers withdraw their orders from the order book during major economic announcements. Liquidity is composed of complementary maker and taker roles rather than being a single undifferentiated concept. Short-term price action depends on a full range of market liquidity sources, not only stop-loss orders. Markets do not mechanically move only toward liquidity zones containing stop-losses. Liquidity pools form when aggressive buyers or sellers push price through support or resistance levels, leaving behind absorption zones called big buy bubbles or sell bubbles. After market makers withdraw, remaining orders are positioned far from normal bid-ask spread levels. Low-liquidity conditions cause explosive price movement eve…