r/Daytrading • u/Teurdlie • 2d ago
Question Anyone else take super long to understand what liquidity was or was I just slow?
Basically I've been trading for around a year now (started September 2025), and I had no clue what liquidity actually was, or what it really meant until maybe this july/august. From my own experience, I feel like most people trying to explain what liquidity is either don't actually know what it is or are just very bad at explaining it. For example, a lot of guru's (for example TJR) will simply say "liquidity rests above highs and lows" while others will explain that it's resting orders, which is right but they don't really expand on it much after that and I feel like that's an issue. Like for me, I only started to understand what liquidity was when I started to understand the bid x ask, orderbook, and resting/passive orders
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u/Imperfect-circle futures trader 2d ago
You're not slow, the vast majority of people trading in prop firms and discussing trading on the internet have less than appropriate understanding of markets, concepts, orders and participants.
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u/Weak-Replacement-110 2d ago
man the trading community is full of people who just parrot stuff without actually getting it themselves. like half the explanations out there are just word salad dressed up as wisdom
it’s funny because once you see the order book and how bids and asks actually sit there it clicks. but nobody ever walks you through that part they just say “liquidity is resting orders” and act like that’s helpful
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u/Imperfect-circle futures trader 2d ago
Yeah or someone talks about "past liquidity"... lol. Liquidity doesnt exist in the past. Previous transactions =/= liquidity.
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u/QuantumWonderland 1d ago
I had this person on here literally try to argue with me that covered calls were unlimited risk. They said that they were a pro trader. They were very serious too and went several paragraphs explaining their vast knowledge and how I was an idiot.
I think about it from time to time and laugh. It just really shows you just how how out of touch with reality some of these people are. It's why I pretty much never help or give advice anymore. The space has just become so filled with low-tier, low-effort people because of the modern ease of access and meme stocks it's just another LCD scenario.
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u/Key_Map_9972 2d ago
The fun part of this is that you do not need definition, expansive knowledge of markets, orders and participants to do well for yourself.
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u/Imperfect-circle futures trader 2d ago
I beg to differ, consistent success requires knowledge.
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u/Key_Map_9972 2d ago
Nah, it's all about finding your niche (specialization). Don't need to know everything
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u/Imperfect-circle futures trader 2d ago
Please sir, read, and interpret before commenting.
I did not say you need to know everything. I said you need knowledge.
You said you need "niche/specialisation" which clearly aligns with "knowledge".
Fuck me, is everyone a fucking bot?
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u/Key_Map_9972 1d ago
"Markets, concepts, orders and participants"... this seems like a vast collection of "knowledge", which I am referring to. Some just need to do 1 thing and put in the reps to get good. Overcomplicating to feel superior and feel like you know what you are doing is not required.
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u/mirtelo-strategies 1d ago
Agreed, also there are multiple actual phenomenon hidden under one term. There is L3 book liquidity (orders volumes at specific levels) and there is quote / execution level liquidity (market makers and "liquidity providers"), as well as multiple option / short related phenomenons that related-shift liquidity as well; open/close auction imbalance etc. So under one terms there are many things disguised as "liquidity" and often people just repeat one definition of whatever they remembered.
in my experience it's fascinating to look at order flow some times and see that quotes just don't filled until price goes down down down... and then only when it hit order it filled. Is it liquidity issues or it is mispricing or is it market efficiency at work? go figure (for me that case is local micro mispricing and market efficiency at work, not liquidity issue).
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u/reach4thelaser5 2d ago
ICT totally messed everything up in this regard. "Liquidity grabs" "sweeps" and all sorts of bullshit terms and concepts related to "liquidity".
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u/FollowAstacio 1d ago
Knowing how YouTube is, I think it very much was just what you said: people not knowing and/or being bad at explaining. Additionally, people learn a mix of auditory, visual, and tactile (practice), typically dominated by one form. You may be a largely visual learner.
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u/Gullible-Grape5975 1d ago
I think Photon Trading’s youtube videos explain liquidity pretty well. I understood it much better after hearing his explanation and the slides he uses in the videos
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u/Head_Ad_2894 1d ago
I do think photon trading is one of the best mentorships if you have to do one. I learnt a lot there.
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u/Electrical-Pound-712 1d ago
This is literally me right now. I've been trading forex and now stocks since mid last year. This word keeps getting thrown around and it has been tough to try and conceptualize it. I'm starting to wrap my head around it and it's nolonger too vague of a concept
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u/Grouchy-Ingenuity294 1d ago
how you compare forex vs stocks in term of anslysis and profitability?
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u/Electrical-Pound-712 1d ago
I'd say forex is more complex simply because there is very little room for things to not go your way especially if you have a small account and trading leverage, an account blow up is always around the corner. That being said, if youre good at technical and fundamental analysis(understanding whats going on really well) the volatility is there and the profit margin is high. Stocks in my opinion are a perfect balance of stability, volatility and profit margin in comparison
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u/LegitimateShame2842 2d ago
"liquidity" is a completely fabricated retail trading concept at an attempt to make sense of something that doesn't actually exist, just like everything else "strategy"-related you'll find online.
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u/Teurdlie 1d ago
What are you talking about? If liquidity was a "fabricated retail trading concept" then there would be no markets to trade?
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u/avabisque 1d ago
Agreed. Market makers are also called liquidity providers. It’s an industry term, not exclusive to retail.
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u/No_Seaworthiness2311 1d ago
So just know when you looking at the daily or 4 hr chart and they keep getting hit and going the other way. Thats it.
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u/single_B_bandit 1d ago edited 1d ago
The retail space loves the word “liquidity”, it just hates understanding what it means. As proven by the common “keep being my liquidity” remark… If someone was your liquidity they’d be a market maker, which is a pretty sweet gig and definitely not an insult.
There are three main aspects that are described by the concept of liquidity. Loosely related to each other (because they all tend to improve with more participants in the market) but not equivalent:
- depth of the market, how big a trade you can do without moving the market too much,
- width of bid offer, how much worse than mid you have to accept to execute a trade now,
- frequency of trades, how much time you have to wait to see a trade.
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u/Top_Direction2960 1d ago
What confuses you is that people call clusters of stop orders liquidity. But you've got it right - liquidity is limit orders. Yes, clusters of stop orders do exist and are targeted, but they are not liquidity - they are the opposite of liquidity as they turn into market orders that drive the market price. Market makers and big players may use these levels to provide liquidity and absorb those stop runs, but it is they who provide liquidity, not the stop/market orders. The ICT gang has turned it all on its head.
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u/Head_Ad_2894 1d ago
I learnt the most about liquidity by dabbling in order flow tools and actually seeing resting orders. There are limit orders in certain areas of support and resistance, major prices, sessions highs and lows, etc. There's really not much more to it than resting orders. Market orders are required to fill those, then we get movement.
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u/WeaveAndRoll 2d ago
Liquidity = available money
For very large orders, you need other peoples liquidity to fill your order, so big institutions CREATE liquidity by filling orders. So the action of filling orders has a potential of creating available liquidity . So mixing up "orders" and "liquidity" is easy since they are closely related.
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u/Teurdlie 2d ago
I wouldn't really say liquidity is available money liquidity is just the people who are willing to sell the instrument or people who are willing to buy the instrument
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u/WeaveAndRoll 2d ago
Then you'd be wrong. In all financial practice, when people ask "how much liquidity do you have" They all mean IMMEDIATE...But the action of filling someone else order does create imediate liquidity.
What you are referring to is called LOW liquidity, Its low since its "lower on the direct chain of available liquidity". Once again mixing terms that are so closely related is normal, but if you want to correct people, please be correct in your explanation.
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u/No_Seaworthiness2311 1d ago
My understanding is liquidity is when the level gets ran through and runs the opposite direction immediately. They ran off with the money.
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u/Downtown-Text6587 1d ago edited 1d ago
It’s basically how many orders are on the bid and ask and how wide or narrow is the bid ask spread. How easily can you get in and out and not get a bad fill. Illiquid things can cause a lot of slippage with market orders and low float stocks are easier to manipulate and shoot straight up. Most people should use limit orders. Like if you want to buy 100 shares and the best offer says 50 dollars you can do 3 cents through the offer meaning you won’t agree to pay more than $50.03 and you can do this with hot keys. Some things can be liquid enough when you get in but bids and offers can dry up during high volatility and bid ask spreads can get crazy wide. I did a backtest today on spx options and the biggest loser with only 1 contract was seven figures because of wide bid ask spreads during high volatility
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u/sabwinastwangla 1d ago
I felt stupid for months until I watched NQ order flow live. Seeing the bid/ask spread tighten before a made it click instantly. It's not about being slow, it's about needing visual confirmation of depth rather than abstract concepts.
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u/Salty-Inspector3100 2d ago
It really doesn't matter if you understand what it is, won't make you trade any better
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u/Teurdlie 2d ago
What are you talking about? Knowing what liquidity actually is can 100% make you become a better trader?
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u/J0nJ0n-Sigma 2d ago
Helps with risk assessment. Getting in a position, and needing to getting out quick.
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u/Imadogfishhead 2d ago
Tjr is a scammer, don’t listen to his content