Definition
External Range Liquidity is the liquidity that will be resting on previous highs and lows (these highs and lows are also used to define the range), this could be in the form of stops or pending orders. Internal Range Liquidity is the liquidity inside the defined range (External Range Liquidity), This could be in the form of any institutional reference that we can use as an entry such as order blocks, fair value gaps, volume imbalance, and more.
How To Identify External and Internal Range Liquidity
The first thing to do to be able to identify external range liquidity and internal range liquidity is to define the range you will be working within, using swing highs and lows to mark the beginning and end of the range. Choose the recent trading range relative to your specific time frame when defining your range.
External Range Liquidity can act as a draw on liquidity based on order flow. meaning if we have external range liquidity on the previous low and the institutional order flow is bearish, price will be attracted or pulled toward our external range.
Internal Range Entry Refers to any institutional reference point that we can use to either sell or buy this could be but is not limited to an order block, fair value, mitigation block, and breakers.
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