Understanding Market Forces and Liquidity CollectionMarkets move to areas where liquidity exists, so learning to spot these zones can help you identify where the "smart money" is likely to act.
Smart Money Trading focuses on understanding how institutional players (banks, hedge funds, and large financial institutions) operate in financial markets. These entities have the capital to influence price movements, often targeting areas of liquidity to fill their large orders. Liquidity collection refers to the process of gathering buy or sell orders at key levels, such as swing highs, swing lows, or consolidation zones, where retail traders typically place their stop losses.
For example, if you see price spiking briefly above a resistance level before reversing sharply, this is often an institution "collecting liquidity" by triggering stop orders placed by retail traders. Recognising these patterns allows smart traders to align their trades with institutional strategies instead of fighting against them.
Key takeaway: Markets move to areas where liquidity exists, so learning to spot these zones can help you identify where the "smart money" is likely to act.