High-resistance liquidity run (HRLR) and low-resistance liquidity run (LRLR) are two technical concepts; These can be used to analyze the strength of price movements and the likelihood of trend continuation or reversal.
What is Liquidity in Trading?
Liquidity refers to the availability of buyers and sellers ready to trade at the current price. This concept relates to a specific asset that can be easily bought or sold while maintaining relative price stability.
Price generally move toward areas with high liquidity to absorb it; therefore, traders need to be aware of liquidity zones to capitalize on them.
What is High-Resistance Liquidity Run (HRLR)?
A High-Resistance Liquidity Run (HRLR) occurs when the price faces numerous resistances (e.g., intermediate highs and lows) to reach an old high or low.
These movements are typically slow and time-consuming, often driven by significant economic news.
Characteristics of HRLR
- Slow price movement;
- High trading volume at key levels;
- Potential indication of a trend reversal or a slowdown in trend momentum.
Bullish Example of High-Resistance Liquidity Run (HRLR)
The "USD/JPY" 2-hour chart demonstrates a bullish HRLR.In this example, the price approaches a key support level, and upon breaking this level, Buy Stop orders are triggered. After these orders activate, the price rapidly rises, creating an opportunity for a Buy trade at the reversal point.
Bearish Example of High-Resistance Liquidity Run (HRLR)
The “USOIL” 15-minute chart shows a bearish HRLR. Here, the price approaches a key resistance level, and upon breaking this level, sell-stop orders are triggered.
After activation, the price decreases, presenting a favorable Sell trade opportunity at the reversal point.
What is a Low-Resistance Liquidity Run (LRLR)?
A Low-Resistance Liquidity Run (LRLR) happens when the price moves smoothly through liquidity zones without significant resistance.
These movements often create Liquidity Voids or Fair Value Gaps (FVGs).
- In a downtrend, the price forms short-term lows and effortlessly sweeps sell-side liquidity below them;
- In an uptrend, the price forms short-term highs and easily clears buy-side liquidity above them.
Characteristics of LRLR
- Rapid price movement through liquidity zones;
- Lower volume compared to HRLR;
- Confirmation of the prevailing market trend.
Bullish Example of Low-Resistance Liquidity Run (LRLR)
When executing a bullish trade using LRLR [such as on Bitcoin chart], the process includes:
- Identifying liquidity around a key support level;
- Waiting for the support level to break and trigger sell orders;
- Observing price rebound upwards with reversal signals;
- Entering a Buy trade upon confirmation of the reversal.
Bearish Example of Low-Resistance Liquidity Run (LRLR)
When executing a bearish trade using LRLR [such as on a “EUR/USD” chart], the process includes:
- Identifying liquidity around a key support level;
- Waiting for the support level to break and trigger buy orders;
- Observing price drops with reversal signals;
- Entering a Sell trade upon confirmation of the reversal.
HRLR vs. LRLR
These two concepts have fundamental differences, as detailed below:
HRLR (High-Resistance Liquidity Run)
- Price path filled with multiple resistances: The price encounters several obstacles (such as peaks and troughs;)
- Slow price movement: The price moves slowly and takes longer to reach its target;
- Suitable for patient traders: Ideal for traders who are comfortable with slow price movements and can wait for their setups to unfold.
LRLR (Low-Resistance Liquidity Run)
- Price path with minimal resistance: The price faces little to no obstacles;
- Fast and smooth price movement: The price moves quickly and seamlessly through liquidity zones;
- Suitable For traders seeking more trading opportunities and comfortable with fast price movements.
Conclusion
HRLR and LRLR can be used to define profit targets. Traders typically prefer simple, quick, and hassle-free setups, which LRLR embodies. These zones are more likely to succeed due to their ease of liquidity absorption.
In contrast, reaching HRLR zones, such as an old high or low, usually takes more time and may require major events like the NFP report or FOMC meetings to push prices to these levels.
