Liquidity Part 1

Liquidity Part 1Lesson 1 of 54 min read

A bounce explains nothing

Why "it bounced off support" is a description rather than a reason, and the question the rest of this module answers.

Liquidity is the largest idea in this method, so it is split across three modules on purpose.

This one covers what it is and why it matters. Where to find it on a chart, and how to trade it, come in the two modules that follow. Nothing here asks you to place a trade.

The usual explanation

Open any chart and you will be told that price bounced off support, meaning a price where falls have stopped, or was rejected by resistance, meaning a price where rises have stopped.

Both sentences describe what happened. Price fell, then it stopped. Price rose, then it stopped.

Neither sentence says why price stopped there. A level on a chart is a line you drew. It has no power to hold anything up.

"It bounced" is a description of the past, not a reason.

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