Liquidity Pools Explained

Liquidity is the fuel of the market. Liquidity pools are areas on a chart with heavy concentrations of stop-losses or pending orders.

Why they matter

Large institutions need deep liquidity to fill massive orders. They often drive price into these pools to grab stop-losses—a process known as 'liquidity seeking' or 'stop hunting'—before reversing.

FAQ

Where are liquidity pools located?

Usually behind clear swing highs/lows or trendline support/resistance.

How can I identify them?

Look for price levels where many retail traders would logically place their stops.

Are they safe to trade?

They are volatile. Never trade them without a defined stop-loss.

Does MixFunded have account limits for this?

Our 8% max drawdown applies to all strategies, including liquidity trading.