Liquidity, Stop Hunts & Fake Breakouts
Why Price Moves Against Retail Traders
What You’ll Learn
- What liquidity really means in trading
- Why stop-losses attract price
- How fake breakouts trap retail traders
- How professionals use liquidity zones
⚠️ Most traders lose not because they are wrong — but because they are predictable.
What Is Liquidity?
Liquidity is where a large number of orders exist. These are usually stop-losses and pending orders placed by retail traders.
Smart money does not chase price — it moves price toward liquidity.
Where Liquidity Usually Exists
- Above obvious highs
- Below obvious lows
- At clean support & resistance lines
- Around round numbers
Stop Hunts Explained
A stop hunt happens when price briefly breaks a level, triggers stop-losses, and then reverses.
📌 If a level looks obvious, your stop is not safe there.
Example: Price grabs liquidity above highs and reverses
Fake Breakouts
Fake breakouts occur when price breaks a level with strong candles, pulls traders in, and then immediately reverses.
This move provides liquidity for larger players to enter positions.
How to Avoid Liquidity Traps
- Wait for confirmation after breaks
- Use structure, not single lines
- Combine liquidity with market structure
- Avoid entering on the first breakout candle
Key Rules Checklist
- Liquidity comes before direction
- Obvious levels are targets, not entries
- Break ≠ continuation
- Context beats indicators
Lesson Summary
- Price moves to where orders exist
- Stop hunts are intentional
- Fake breakouts trap impatience
- Professionals wait, retail reacts
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