Why Liquidity is important
You understand in this post is a detailed explanation Why Liquidity is important in stock market and what is pending liquidity
lets Understanding what is Liquidity
i tell you In the easy way, liquidity is a where day trader and positional trader place their stop-loss (SL) orders. The market moves up and down because there buyers and sellers plays ups and down. With every ups and down, in the support and resistance levels. in this levels there are most of points stop-loss are there this called liquidity. The price will not to get a new range until previews stop-loss levels are triggered.
What is Pending Liquidity?
Pending liquidity is a where buyers and sellers stop-loss have been placed in the support and resistance and aslo a new ups and downs levels but didn’t hit the SL, This is a pending liquidity. one more example- the market may give a one-sided movement for a long side or down side and not hitting the day trade or positional traders. These untriggered SL called a pending liquidity.
and The big players try to hit retail pending liquidity to make a hug profits ,and a suddenly announce company news and also event, and also economic announcement or a geopolitical event, can hit the SL or create a new high. if you want to make profits with a minimum risk then go with big players.This the Accumulation, Manipulation, and Distribution this are the same things.
suggest you to read Road map to start Trading and Investing
Why Is Liquidity Important?
Because liquidity is the main chapter that every single trader who start there journey in market wants to know. It is one of the most basic and advance knowledge that day traders must know.
Technical Analysis:
Technical Analysis is the basic step, in this chapter you wants to understanding candlesticks, chart patterns, and support and resistance levels.
Volatility:
in one words Volatility is the price speed, example if Donald trump post in there page tomorrow launching the missile in India this news effect the nation and world wide and price will be drop in the next day, and also effect but some kind of like inflation data, company updates, and policy changes.
Market Sentiments:
the market sentiments is there are three types of one is bullish and second is bearish and the last is called sideways.
News & Events:
if you a day trader or a investor keep eyes on the news and company updates and policy.
Trading Plan:
and most important if you are a day trader you have a trading plan too. like a strategy for when and where to enter a the trade and, most importantly, where a solid exit plan.
Psychology:
and the most and very important step is mind psychology, Emotional control if you can’t control your emotion then you lose your all capital.
Risk Management:
and the best part of a day trading is to keep you money safe. many trader tells you that risk your money in a day trading 1% to 2% of your total capital on a single trade. For example, if your amount ₹50,000, then the maximum loss should be limited to ₹500 to ₹1000. and a profit target is to be A good risk-to-reward ratio is 1:2 to 1:3 is recommend if you wants to be a profitable trader.