If you look at a chart and don't understand why price rises, falls, or turns at the same places, the reason is almost always one thing — liquidity. It is the foundation of every move, and learning to see it makes the market readable.
Liquidity is the ability to buy or sell an asset. There are always buyers and sellers in the market, and price is the result of the balance between supply and demand: when buyers dominate, price rises; when sellers dominate, price falls.
Picture rush hour in a big city. Most people order a taxi from the same place — by the station or a business centre. That is where the main interest sits: external liquidity. When cars run short and the price climbs, some people drift to nearby districts and wait. That is internal liquidity. Once things settle, interest returns to the main zone. Interest never stands still — and the market works the same way: price is always seeking liquidity.
Price moves toward where orders and participant interest are concentrated. First it reaches for external liquidity, then returns to internal liquidity to redistribute volume.
On the chart, liquidity most often sits in swings — local highs and lows where price stalled and met support or resistance. A classic swing is three candles: the middle one prints the high or low while the two neighbours don't exceed it. Middle candle higher than its neighbours — a swing high; lower — a swing low. The higher the timeframe and the stronger the move into that point, the more important the swing. Large, obvious swings form external liquidity — the main target of a move; smaller swings inside the move form internal liquidity that the market works with after taking the external.
Between swings, price often travels through imbalances — zones it passed too quickly. The market returns there to restore balance and redistribute volume before the next move. One thing matters here: we don't know in advance which internal liquidity the market will continue from. So we don't guess and we don't try to predict the future — we read the current structure, gather facts, and act only on confirmation. What counts as confirmation is covered in the lesson on the entry model.
Liquidity is the basis of price movement. Swings show where it sits; imbalances show how price gets to it. Price constantly moves from external liquidity to internal and back. Understanding this logic is what makes a chart readable.
Liquidity is the base layer of the FocusProfit methodology — every range and reaction zone is read through it. The FocusProfit Trade Model indicator marks swings and ranges on the chart so external and internal liquidity are easier to locate, but the indicator does not replace understanding the logic.
See the full framework in the methodology section, and watch liquidity at work on live instruments in the market analysis.
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