Ryan Low retweetledi
I bet almost no one throwing around the word liquidity truly understands what it means.
For most, it’s just a pattern on a chart an Order Block, Breaker Block, Supply & Demand, or Support & Resistance. While not entirely wrong, since these formations are indeed where liquidity tends to cluster, relying solely on textbook patterns leaves the bigger picture hidden.
Liquidity is liquid: It flows and constantly shifts. In its rawest essence, liquidity is the act of buying and selling. Once you grasp this, you realise that every move traders make, whether retail or professional, is actively creating liquidity. Every execution provides the "other side" of someone else’s trade.
However, there is a fundamental distinction between the two primary forms of liquidity: Planned and Forced. For the retail trader, liquidity typically manifests in the forced variety.
Forced Liquidity consists of:
· Stops&Liquidations: Automatic orders triggered when a price level is breached.
· Unplanned Executions: Panic selling or FOMO buying where the trader is forced by emotion or margin calls to act.
Unplanned trades are often triggered by the calculated actions of market makers, whales, and institutions. The moment a trade is executed, liquidity is either added to or removed from the order book, depending on the type of execution. For those in control, a forced, unplanned trade is the ideal mechanism to build or offload large positions.
Institutional Size requires deep liquidity to operate without massive slippage. To generate this, they utilise every tool at their disposal: Social media figures, news cycles, political agendas, and most commonly, classic TA formations that trigger retail entries.
These forced trades create a secondary wave of liquidity when they are eventually stopped out or liquidated. As this happens, capital flows back through the order books, ready to be harvested by the other side of the trade once again.
Stops are either the direct result of these forced trades or simply a standard component of a disciplined execution. For the professional, a stop loss is a resting order in the book, a pre-planned exit placed behind a technical barrier that, if breached, invalidates the trade thesis. Even though a stop loss is technically forced liquidity (as it triggers against the trader’s primary direction), the prepared trader does not suffer because it was a calculated risk within their counter-thesis.
To put it simply: Forced liquidity is almost always the result of a larger participant needing a counterparty to build or exit their own position.
In the real world, institutions use sophisticated methods to engineer this, from news cycles to social media. While many traders focus only on these often messy external factors, they often miss the bigger picture. The market is a highly efficient wealth-transfer mechanism for those who understand its true nature. In reality, every common knowledge chart formation is a potential trap, just another tool in the arsenal used to manufacture the liquidity necessary for the smart money to operate.
Your pattern might sound more sophisticated than the rest, but if it's shared across the internet and utilised by thousands, it isn't the secret weapon you imagine. When it comes to isolated formations, success often boils down to pure statistics. It is entirely possible to trade the market without understanding the mechanics behind the candles, provided you can execute a statistical edge while removing yourself from the equation.
In reality, most traders are too emotionally and intellectually involved to maintain that level of detachment. They transition from zero knowledge to basic technical analysis and believe they’ve finally found the key. They find themselves stuck in the gap between seeing the full picture and maintaining statistical discipline.
Simply put: They try to outsmart a market that thrives on their attempts to do so.
Not everyone processes the market the same way. My approach is tailored for the discretionary thinker. My edge isn't found in repetitive statistical execution of static patterns, but in understanding fluidity, the constant, shifting movement of capital and the mechanics of the "trap."
The game has many layers, each designed to trap players based on their specific level of knowledge. If you survive long enough and stay consistent, you eventually cycle through these stages yourself. You begin to recognise where others are in their journey, watching them fall into the same traps you once did. This perspective is invaluable. By listening to the opinions of others and assessing their level of competence, you can integrate their likely mistakes into your own decision-making process.
The Second Form: Planned or Intentional Liquidity
Every time you place an order, whether limit or market, you are participating in the creation or consumption of liquidity. One side makes (adds to the book), and the other takes (removes from the book). If these terms are unfamiliar, studying market microstructure is essential to understanding how the engine actually runs.
As a small fish, you have the luxury of instant execution. You will almost always find enough resting liquidity to fill your orders, even at market price. Your trades do not create walls that price must struggle to breach.
In short: Without significant size, your actions have no active influence on price movement (excluding, of course, the lowest-tier shitcoins or stocks).
For a participant with size, the game changes entirely. To execute a large position, they require a counterparty, someone willing to sell to them or buy from them in equal volume. At a certain scale, the order books are simply too thin to execute a plan in a single transaction without causing massive, unfavorable price slippage. Consequently, they utilise limit orders, letting them rest in the books and waiting for the market to come to them.
MMs are the grease in the gears. They are incentivised to provide a certain level of depth to keep the market liquid. They profit primarily from the bid-ask spread and small transaction fees.
The real controversy arises with the second form of market making, where the house takes the direct opposite side of your trade. This is the behavior many crypto exchanges are accused of. However, in strictly regulated markets, the incentive is different: The exchange profits from frequency. Their goal is to keep you in the game and trading often. While they might use psychological tactics to encourage over-trading, they aren't hunting your specific stop loss on a chart while having all your data, they simply want you to keep clicking buttons.
While the term market maker is used loosely in trading circles, we can define them as the entities that provide the structural liquidity required for the market to function. However, the true adversaries you face are the whales, institutions, and heavyweight traders. The nature of your opponent shifts depending on the asset class:
Low-Cap & Unregulated (e.g., Altcoins, Shitstocks): You are often trading against faceless whales and predatory exchanges. In this wild west, influence is manufactured through social media hype and coordinated news cycles to lure retail into the wrong side of a trade. On shadier platforms, you may even face execution issues or flash events designed to wipe out the books. The supply of these assets is, more often than not, monopolised and used against you.
High-Cap & Regulated (e.g., $BTC, $SPX): As volume and regulation increase, the shadiness diminishes, but the sophistication grows. In these markets, you aren't fighting a guy or group on twitter, you are fighting high-frequency algorithms and global macro-funds.
There is no better or worse market, only different environments. While an edge can be found in either, regulated assets offer a level of safety and structural clarity. In these high-volume environments, price tends to move with less erratic noise. This structural stability provides a dual benefit: It often allows the discretionary thinker to read the fluidity of the tape with greater precision, while simultaneously providing the mechanical trader with the clean, repetitive data necessary to maintain a statistical edge.
Ultimately, the market doesn't care how you perceive it. Whether you see it as a shifting sea of human emotion or a sequence of mathematical probabilities, the underlying engine remains the same: The constant search for liquidity.
By recognising that size views forced liquidity as a structural necessity, you begin to see what the candles actually represent. Their options are not endless: If the goal is to move massive volume, they must engineer scenarios where large groups of traders act simultaneously.
They bend the rules and they shape the game board, but they cannot break the fundamental laws of the market. This reveals their greatest weakness: They cannot move without being seen.
You can't win against them, you can only trade alongside them by truly understanding the game they play.
Every formation creates liquidity upon execution. Trendlines, Swing Highs/Lows, FVGs, Order Blocks, and Support & Resistance are all markers where liquidity is manufactured. Institutional players even spoof order flow software to create false signals. The layers are endless, and there is no perfect TA that works with 100% certainty. The most robust strategies integrate these tools while remaining fluid.
To understand what your opponents are up to, you must learn to read their footprints. You need to see where they executed and why. In every move the market makes, you must be able to identify the winners and the losers.
You can certainly choose any single method, accept its win rate, and manage your risk to remain profitable in the long run. However, if your personality isn't naturally mechanical, you will likely become your own greatest obstacle. You must either learn to get out of the way and let statistics play out over hundreds of trades, or, if you simply cannot shut your brain off, move past the middle ground.
This is where most traders are stuck: They are too emotionally and intellectually involved to be mechanical, yet not sophisticated enough to shift their perspective with the flow of the market.
If you want to leave the middle of the bell curve, you must make a conscious choice about the trader you intend to become. There is no right or wrong, only the path that aligns with your psychological DNA.
The Mechanical Trader: The System
To be a mechanical trader, your strategy must be so objective that it could be executed by a computer. It is simple, repetitive, and anchored in proven statistics. This is arguably the fastest route to profitability because it removes the burden of constant choice. In this model, you accept that you will be forced liquidity (stopped out) 50% or even 70% of the time. It doesn't matter, because you trust the math to resolve in your favour over the long run.
To build a strategy with a genuine statistical edge, you must still accept the universal truths about how the market truly works.
The Discretionary Trader: The Intuition
To be a discretionary trader, you must outplay the computer. Your edge is your adaptability. You do not remain static. You move with the tides, shifting between statistical probabilities by trusting a refined intuition and a subconscious mind trained on thousands of hours of screen time.
This path requires you to feed your mind information that goes far deeper than "trading a key level." You must understand the market's deepest layers, the intent, the sentiment, and the traps. Because you are constantly involved in the decision-making process, you must maintain absolute self-control. You cannot afford to become forced liquidity due to an emotional lapse: You must be the one observing the force, not the one feeling it.
Liquidity, order flow, buying and selling, whatever you choose to call it, is the foundation of everything in this game. To build a strategy that truly resonates with you, you have to understand its core mechanics. Look beyond "key levels" and the superficial definitions of these terms.
Take the time to look behind the candles and into the order book. Learn to read the game for what it truly is, instead of hunting blocks you don’t understand, like you're playing Tetris.
Stop being forced liquidity and start becoming intentional liquidity.
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