// Definition
In trading, liquidity is the pool of pending orders, especially stop-losses, that sits around obvious highs and lows on a chart.
Explained simply
Traders tend to place stop-losses in the same obvious places: just below swing lows, just above swing highs and beyond equal highs or equal lows. Those clusters of orders are liquidity.
Large players need liquidity to fill big positions, so price is often drawn toward these areas before making its next real move.
Tip
If your stop-loss sits exactly where everyone else would put it, it is sitting in a liquidity pool.
A full video lesson on this topic is coming soon to TradingGain Academy.
For education only, not financial advice. Trading is risky and you can lose money.