The Secret of Liquidity Grab – Why Price Hunts Highs Before Fall

Hello Traders!
Have you ever noticed how the market first breaks a recent high, traps breakout traders, and then suddenly reverses? This is not random, it’s called a liquidity grab.
Understanding this concept can completely change how you see price action.

1. What is a Liquidity Grab?
Liquidity means orders in the market, stop losses, buy orders, sell orders.
When price hunts a previous high or low, it triggers stop losses and pending orders. This creates a sudden burst of liquidity.
Institutions use this liquidity to enter or exit large positions without causing slippage.

2. Why Price Hunts Highs Before Falling
At previous swing highs, many breakout traders place buy orders and short sellers place stop losses.

When the price spikes above that level:

• Breakout traders enter long positions.
  
• Short sellers’ stop losses get triggered (buy orders).
  
• This creates a pool of buying liquidity. Once institutions have sold into this buying pressure, price often reverses sharply.
  

3. Why This Matters for Retail Traders

• Most retail traders get trapped during these liquidity grabs.
  
• They either chase breakouts too late or panic exit at the wrong time.
  
• By recognizing this pattern, you can avoid being the liquidity and instead trade with the smart money.
  

4. How to Use This in Trading

• Wait for the Grab: Don’t rush into a breakout. Wait to see if price quickly reverses after taking out a high/low.
  
  
• Confirm With Volume: A liquidity grab often shows a sudden spike in volume followed by an opposite move.
  
  
• Look for Rejection Candles: Pin bars, engulfing candles, or sharp wicks at highs/lows confirm the trap.
  

Rahul’s Tip:
Next time you see price breaking a high, don’t get excited. Ask yourself, is this a real breakout or just a liquidity grab? Waiting a little longer often saves you from being trapped.

Conclusion:
Liquidity grabs are the hidden traps of the market. Price doesn’t move randomly, it seeks liquidity first.
By understanding this, you can avoid becoming the victim and instead align yourself with the institutions.

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