Understanding strong and weak highs and lows in forex trading is crucial for price action
analysis, as these concepts play a significant role in predicting market trends and reversals. Let's
break this down into simple terms, step by step.
1. What Are Highs and Lows?
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High: A point where the price stops rising and starts to fall.
Low: A point where the price stops falling and starts to rise.
2. Strong vs. Weak Highs and Lows
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Strong High:
o A high where the price struggles to break above it and reverses significantly
downward.
o Indicates a potential resistance level and suggests that sellers have more control
in this zone.
o It’s strong because the market shows hesitation or weakness when approaching
this high.
Weak High:
o A high that is likely to be broken because the price shows momentum or strength
toward it.
o Indicates that buyers are in control and are likely to overcome the resistance.
Strong Low:
o A low where the price struggles to break below it and reverses significantly
upward.
o Indicates a potential support level and suggests that buyers have more control in
this zone.
Weak Low:
o A low that is likely to be broken because the price shows momentum or strength
toward it.
o Indicates that sellers are in control and are likely to overcome the support.
3. Characteristics of Strong and Weak Highs/Lows
Aspect
Trend
Strong High
Price is reversing
downward
significantly.
Weak High
Price is likely to
break upward.
Strong Low
Weak Low
Price is reversing
Price is likely to
upward
break downward.
significantly.
Aspect
Strong High
Sellers gain
Momentum
control.
Structure
Clear rejection at
this level.
Weak High
Strong Low
Buyers gain
Buyers gain control.
control.
Price keeps testing or
Clear rejection at
consolidating near
this level.
this level.
Weak Low
Sellers gain control.
Price keeps testing or
consolidating near
this level.
4. Why Are These Concepts Important?
1. Trend Identification:
o Strong highs in a downtrend show that sellers dominate.
o Strong lows in an uptrend show that buyers dominate.
2. Entry and Exit Points:
o Weak highs/lows can be targets for take-profit or breakout trades.
o Strong highs/lows can act as zones to enter trades in the opposite direction
(reversal trades).
3. Market Behavior Prediction:
o Understanding whether a high or low is strong or weak helps traders anticipate
whether the trend will reverse or continue.
4. Support and Resistance:
o Strong highs and lows often align with support and resistance levels.
5. How to Identify Them in a Chart?
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Look for price rejection at a high or low (wicks on candlesticks, sharp reversals).
Observe the number of tests at a level:
o A level tested multiple times but not broken = strong.
o A level being approached with momentum = weak.
Analyze the trend context:
o In a strong trend, highs in an uptrend and lows in a downtrend are more likely to
be weak.
o In a ranging market, highs and lows are more likely to be strong.
6. Application in Price Action and Trend Prediction
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
In an Uptrend:
o Highs are likely to be weak (breakable).
o Lows are likely to be strong (supportive).
In a Downtrend:
o Lows are likely to be weak (breakable).
o

Highs are likely to be strong (resistant).
Significance in Price Action:
o Breakout Trading: Weak highs and lows are key for breakout traders who target
these levels for continuation moves.
o Reversal Trading: Strong highs and lows offer opportunities for reversal trades,
as the market tends to respect these levels.
7. Real-World Example (Simplified)
Scenario 1: Weak High
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Price is moving upward, forming a high at 1.2000.
After a small retracement, the price continues testing 1.2000 and moves closer with
momentum.
This indicates the high is weak, and the price is likely to break above 1.2000.
Scenario 2: Strong Low
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
Price falls to 1.1000 and shows sharp rejection (e.g., long wicks, bullish candlesticks
forming).
This indicates the low is strong, and the price is unlikely to break below 1.1000,
suggesting a potential buy opportunity.
8. Tips for Using Strong and Weak Highs/Lows in Trading
1. Combine with other tools:
o Trendlines, moving averages, or Fibonacci levels to confirm strong/weak levels.
2. Observe volume:
o High volume near a weak high/low often precedes a breakout.
3. Context matters:
o In a trending market, weak highs/lows are more significant for continuation
trades.
o In a ranging market, strong highs/lows dominate as reversal zones.
Let’s break down Stop Hunt Liquidity and Liquidity into simple terms and understand their
significance in forex trading.
1. What is Liquidity in Forex?
Liquidity means how easily and quickly an asset (like a currency pair) can be bought or
sold without drastically changing its price.
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High liquidity = Many buyers and sellers → Price moves smoothly.
Low liquidity = Fewer buyers and sellers → Price can spike or drop suddenly.
2. What is Stop Hunt Liquidity?
A stop hunt is when the market moves to trigger stop-loss orders placed by traders. It occurs
when large players (like banks, institutions, or market makers) drive the price to areas where
they know many traders have placed stop-loss orders.
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Stop-loss orders: These are automatic exit points traders set to limit losses if the market
moves against their trade.
Stop hunt liquidity: The pool of stop-loss orders around certain price levels.
3. How Does Stop Hunt Liquidity Work?
Step-by-Step Explanation:
1. Market Participants Place Orders:
o Traders typically place stop-loss orders just above resistance or below support
levels.
o Example: A trader sells at $1.2000 and places a stop-loss at $1.2050.
2. Market Makers or Institutions Identify Liquidity Pools:
o Big players know where most traders place their stop-loss orders (e.g., above
resistance or below support).
o These zones become liquidity pools, where large orders are concentrated.
3. Price is Driven to Liquidity Pools:
o Market makers push the price toward these levels to trigger the stop-loss orders.
o When stop-losses are triggered, it creates buy or sell orders, adding liquidity to
the market.
4. Big Players Enter or Exit Trades:
o Large players use the liquidity created by stop-loss orders to enter or exit their
positions efficiently without causing massive price spikes.
5. Price Reverses:
o After collecting liquidity, the price often reverses sharply in the opposite
direction.
4. Why Do Stop Hunts Happen?
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The forex market needs liquidity for smooth trading, especially for big players like banks
or hedge funds.
Big players require a lot of buyers or sellers to enter or exit trades without disrupting the
market.
Retail traders’ stop-loss orders provide that liquidity.
5. Example of Stop Hunt Liquidity
Scenario:
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
The market is trending upward toward a resistance level at $1.2000.
Many traders expect the price to reverse and place sell orders at $1.2000 with stop-losses
above at $1.2050.
What Happens:
1.
2.
3.
4.
The price pushes slightly above $1.2000, hitting stop-losses at $1.2050.
This creates a surge of buy orders (stop-loss orders for the sellers).
Big players sell their positions to these buyers.
After collecting liquidity, the price reverses and falls.
6. Liquidity in General and Its Role
Liquidity Zones:
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Liquidity pools form around areas with many pending orders (e.g., stop-losses, buy/sell
orders).
These zones are often near:
o Support and resistance levels.
o Trendlines.
o Key psychological levels (e.g., round numbers like 1.0000, 1.2000).
Role in Price Movement:
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Price moves toward liquidity: The market naturally gravitates toward areas with high
liquidity because it needs orders to match buyers and sellers.
Liquidity determines how smoothly price moves:
o High liquidity zones = Smooth movement.
o Low liquidity zones = Choppy or erratic movement.
7. Why is Liquidity and Stop Hunt Liquidity Important?
1. Helps Predict Market Moves:
o Knowing where liquidity pools exist can help traders anticipate price movements.
o Example: If a resistance level has many stop-loss orders above it, the price might
break above briefly before reversing.
2. Avoid Being "Hunted":
o Retail traders often fall victim to stop hunts because they place stop-losses at
obvious levels.
o By avoiding predictable zones, you can reduce the chance of being stopped out
unnecessarily.
3. Understand Reversals:
o After a stop hunt, the market often reverses. Recognizing this can help you time
entries.
4. Trade with Big Players:
o Following liquidity patterns helps you align with institutional strategies.
8. How to Use This Knowledge in Trading
Avoid Obvious Stop-Loss Zones:
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Don’t place your stop-loss too close to support/resistance levels. Instead:
o Place them slightly beyond the typical zones.
o Example: If support is at $1.1000, avoid setting your stop at $1.0990; instead, set
it at $1.0985 or lower.
Trade Liquidity Zones:
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Look for areas where stop-loss orders are likely to be clustered (above resistance or
below support).
Trade after the stop hunt is completed and the market shows a clear reversal signal.
Confirm Stop Hunt with Price Action:
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Look for wicks (long shadows) in candlesticks near key levels, indicating price was
pushed to hunt stops before reversing.
Summary:
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Liquidity is the ability to buy or sell easily without major price changes. It drives market
movements.
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Stop Hunt Liquidity is the process where big players trigger stop-losses to create
liquidity for their trades.
Understanding these concepts helps you:
o Predict price movements.
o Avoid being stopped out unnecessarily.
o Trade more strategically with big players.
If you need charts or specific examples to visualize this, let me know!