Price Consolidation: Liquidity zones are often formed during price consolidation periods. Traders can identify these zones by looking for areas on the chart where the price has been trading in a narrow range for an extended period.
What is a liquidation level?
The liquidation level is a fail-safe or risk management feature that protects traders and dealers from taking on significant losses beyond a specific point. The liquidation level is a predetermined point at which an automatic liquidation process begins. The broker may issue a margin call first, so the liquidation level isn't reached.
What are the benefits of identifying liquidity zones?
1. Improved Trade Entries and Exits: By identifying liquidity zones, traders can enter or exit trades at optimal levels. Liquidity zones often act as significant support or resistance levels, which means that price reversals or breakouts are likely to occur in these areas.
