Liquidity

Here's a quick overview of how smart money manipulates liquidity in markets:

Building Liquidity:

• Smart money enters large positions slowly over time to avoid moving the market. This adds depth to the order book.
• They may intentionally take the wrong side of trades to encourage other participants to get on board and add liquidity.
• They spread their orders across multiple exchanges and platforms to disguise their overall position size.
• They may coordinate large orders with other institutional players to control price action, trapping traders on the wrong side.
• Smart money traders patiently allow less sophisticated retail traders to build up liquidity before making their move.

Taking Liquidity:

• Once sufficient liquidity builds up, smart money exits large positions rapidly to capture profits.
• They look to trigger resting stop and limit orders from trapped retail traders to accelerate the move.
• Coordinated price spikes and flash crashes quickly take out liquidity, leaving thinner markets in their wake.
• Key technical and psychological price levels are targeted to trigger cascading stop losses.
• News events and data releases are used as cover stories to mask deliberate liquidity grabs by smart funds.
• They scale out of massive positions into market weakness as trapped traders panic sell.

So in summary, smart money cautiously builds liquidity through layered accumulation or distribution before aggressively taking that liquidity by orchestrating sharp reversals at key technical levels. This process continually transfers wealth from amateur to professional traders.