Before every one-sided move, there is an incentive as mentioned at the beginning of this liquidity chapter. We discussed the concept that it rests above highs or below lows.

Let’s visualize the concept of liquidity once again. Now take a step back and try to really understand this one.

Let’s warm up first. Remember this concept, price being transactable and areas where price is not.

Our goal now.... is to take it a step further, seek the areas where price will go from liquid to illiquid.

Look closely.

The highlighted area is where we shifted from liquid market to illiquid markets, do you see why?

Because we grabbed liquidity below previous lows to fuel the next moves. So now we can start looking at these pivotal points where we anticipate liquidity to be injected/distributed in the market.

This allows us to think broader. We don't predict the market; we try and react to what it gives us. So instead of just thinking on one plane, we can now think in liquidity like this as well.

So, under the lows, price will be considered cheaper once again, tempting either more accumulations or distributions to occur at that price. New transactions.... INJECTING LIQUIDITY.

Now one of two things happens at these places, a liquidity grab, or just a continuation. The most interesting one is a liquidity grab. (no body close above the wick).

Do you see how we went higher, to go lower? Water flows. Price flows. We tapped into the liquidity pool above, to fuel the move down, to really fuel the greater move towards.... you guessed it...

Buy side liquidity...

As we grabbed liquidity below previous lows, we started building nice structure to the upside. Towards the weak highs.

Why were they weak?

Since they didn't continue structure to the downside, breaking AND closing below the previous low and forming new continuation patterns.

IE the second option of what happens near liquidity pools; continuation of price.

See it like this, put yourself in the shoes of an investment bank, with a balance sheet. With each area on your charts that is above or below certain prices, it gives new opportunities for your goals -> More on that later.

The most important concept is just to make sure you understand that highs and lows are now catalysts for liquidity shifts.