This post i cover Liquidity and Manipulation concept in forex Trading.

Liquidity and Manipulation:

The markets need to generate liquidity in order to move up or down. If liquidity isn't already there, then it will be created. When new traders come to hear about forex and what to learn about it, one of the first things they do is search about it on YouTube. What's the first thing that comes up? Retail basics like; support and resistance; chart patterns which are extremely popular in the industry, ect. 4/5 years ago when i got into trading, support and resistance and indicators what was i was being taught. The strategy was based off of moving averages and the stochastic, which looking back at now is quite funny. What some brokers also do is they offer free education for their clients once you start trading with them. This education will usually be based around retail methods like support & resistance. Why is this? It's simple. They want to generate liquidity into the markets. These retail methods are not unknown to large institutions, and people with large interests. Of course they aren't. All this information is out there for free. So if all of this information is availble for free, then don't you think it's wise to assume that these people with huge amounts of money are going to use it against the retail traders, in order to manipulate the markets? I want everyone to be aware that these markets are very much rigged, and designed for you to lose long term. It's all manipulated, but as long as we know this, we have an advantage to work around it, and stay away from the retail side of things. The majority of us have learnt all these retail methods, so let's try and rewire our brains and do what the others aren't. When we dig deep into chart patterns like the double top/double bottom, or bull/bear flags, which retail traders absolutely love. They are all manipulated and they only really work when you know what your doing. Traders are taught to sell at double tops, or buy at double bottoms. If we know this, then what does that mean? It means that there is lots of liquidity above/below these areas. So that is why we know a double top as equal highs, and a double bottom as equal lows. We expect price to be manipulated at and around these areas. All you need to do is go and look at the data, It's all there. Once we see large moves up, sell side liquidity will usually need to be generated before hand. The same goes for when we see large down moves, buy side liquidity will usually need to be generated or taken out.

Different types of liquidity: The different types of liquidity that I focus on are as shown below. So the first type is trendline liquidity. Traders are taught to buy at a trendline or wait for the break out of that trendline to go short, and vice versa. This creates lots of liquidity at these areas that the markets will manipulate to grab liquidity before a larger move in the markets can take place. The second type is support and resistance liquidity, which in my opinion can also be classed as a range. Again, traders are taught to buy at support and sell at resistance. This generates large amounts of liquidity above and below these areas in the market. Unlike us as just traders in the market, we can just buy or sell at any time or any price we want to because of the size of our positions, but this is not the case for the large banks and institutions with huge pools of money. They need a reason to buy or sell. They can't take positions anywhere they want. They need to buy from someone who is selling, or sell to someone who is buying. If you were going into a store and looking to buy something, but no one is selling anything, then you can't buy. The same concepts apply. If so many of these traders are buying at support, then that means that the large banks can't also buy. This is why we see these areas in the market be manipulated which gives the market fuel to move. The third and final type of liquidity is going to be equal highs & equal lows. Otherwise known as a double top and double bottom by the retail side of trading. People are taught to sell from a double top and buy at double bottoms, which of course generates liquidity above and below these areas. As we know the markets need to target liquidity in order for the markets to move. This is the exact reason why we know these patterns as equal highs or lows because we know how these areas get manipulated so we expect price come into these levels.

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