Lesson 17 of 20 · 8 min
Liquidity Pool
Also called Equal Highs and Lows
Step 1
What it is
When price stops at the same level twice, the level becomes obvious. Stops from people on one side and breakout orders from people on the other tend to gather just past it. That cluster of orders is called a liquidity pool, and equal highs or equal lows are the classic example.
A pool tells you where orders might be, not which way price is going next. Price may run through it, reverse from it, or ignore it.
We mostly use a pool as somewhere to aim for. If the trend is already moving that way, it gives you a logical place to take profit. It also tells you where not to leave your own stop.
Step 2
See it on a chart
Equal highs ahead of an uptrend, used as a target.
Illustrative chart with made-up prices and tick volume, built for teaching. It is not real market data and not a trade idea.
Step 3
The exact rules
What must be true before entry
- A clear trend in your direction.
- Equal highs or lows ahead of price, within reach.
- A pullback to a level where the trend is still intact.
What volume should show
Where to enter
Where the hard stop goes
Where the target goes
What invalidates the idea
- Price closes past your higher low or lower high.
- The pool is taken out before you enter. It is no longer a target.
When not to take it
- The pool is too close to offer 3:1.
- You want to enter because the pool exists, without any other reason.
- Major news is due soon, or you would be trading outside your planned hours.
- You have just taken a loss and feel the need to win it back.
Step 4
Your turn: plan the trade
Price is falling, with equal lows ahead of it, and has pulled back up. Mark your plan.
This setup is a short. Look at the candles and the volume. Choose a line below, then tap the chart to place it. You can also drag its label or type a price.
Illustrative chart with made-up prices and tick volume, built for teaching. It is not real market data and not a trade idea.
Step 5
The trap: holding on past your target
When price nears a target, the mind starts picturing how much further it could run. So you cancel the order, then watch the move reverse. Decide in advance what you will do at the target, and leave it alone.
Read about screen timeStep 6