Market liquidity is the lifeblood of trading. Without it, price cannot move. Institutions—large banks, hedge funds, and central banks—require massive amounts of liquidity to fill their orders without causing excessive slippage.
The Myth of Supply and Demand
Common retail supply and demand areas are often where liquidity is "resting." Big banks know that retail traders place their stop losses just above or below these zones. This creates a pool of liquidity that institutions use to fill their much larger positions.
Understanding Smart Money Footprints
1. The Liquidity Grab (The Raid)
Before a major move, the market often sweeps a significant high or low. This is not a "fakeout" in the retail sense—it is a necessary raid on liquidity to fuel the next trend.
2. Market Structure Shift (MSS)
A shift in market structure occurs when a previous swing high/low is broken with momentum after a liquidity grab. This is the first signal that the trend has officially changed.
PO3: Power of 3 (Accumulation, Manipulation, Distribution)
This is the cornerstone of institutional price delivery. In a bullish day:
- Accumulation: Happens during Asian session.
- Manipulation: Usually a dip below the open price during London (The Judas Swing).
- Distribution: The main expansion move to the upside.
Practical Application
By understanding these concepts, you stop being the "liquidity" and start trading alongside it. AURA Analytics integrates these logic gates into every signal our engine generates.