Market Structure & Liquidity · Entry 39 of 71

What Is Internal & External Liquidity?

Resting orders within consolidation vs. major swing limits

Core Definition

Liquidity refers to areas in the market where stop-loss orders and pending orders are clustered. It is generally categorized into Internal Liquidity and External Liquidity.

Internal Liquidity (Within Structure)

• 1. Found inside consolidation zones.
• 2. Includes minor highs and lows.
• 3. Often targeted before continuation of trend.

External Liquidity (Outside Structure)

• 1. Located above major swing highs or below major swing lows.
• 2. Represents massive pools of stop-loss orders (buy stops and sell stops). The market often clears internal liquidity first before moving toward external liquidity, seeking the next pool of orders to fill.