Internal and external liquidity
Also called IRL, ERL. What it means, how it looks on a gold (XAUUSD) chart, and the mistake most traders make with it.
Internal and external liquidity: External liquidity sits outside a dealing range: its swing high and swing low. Internal liquidity sits inside it, mainly fair value gaps. Price tends to move from one to the other.
Internal and external liquidity on a gold chart
Gold's 4-hour range is $4,080–$4,160. After sweeping $4,080 (external), price often moves to fill a gap at $4,118–$4,126 (internal) before deciding whether to run $4,160 (external).
How traders use it
After a sweep of external liquidity, traders target internal liquidity, and from internal liquidity they target the opposite external level.
Common mistake
Expecting price to go straight from one extreme to the other. Gold usually stops at internal levels along the way.
Questions
What does internal and external liquidity mean in trading?
External liquidity sits outside a dealing range: its swing high and swing low. Internal liquidity sits inside it, mainly fair value gaps. Price tends to move from one to the other.
How is internal and external liquidity used on gold (XAUUSD)?
After a sweep of external liquidity, traders target internal liquidity, and from internal liquidity they target the opposite external level.
Educational content, not financial advice. Every concept here is a probability, not a guarantee.
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