Understanding Liquidity in Crypto: How STB, BTS & SH Influence Market Moves

Exploring the hidden forces of supply and demand that shape price action on the charts.

What is stop loss hunting (SLH)?

Stop loss hunting is simply used to neutralise liquidity (stop losses). Hunting involves deliberately moving outside of an acceptable range.

Boundary hunting has two main purposes:

1. To remove existing stops.
2. Forcing traders to open positions in the opposite direction when a level is broken.

WHAT IS STOP LOSS HUNTING?

1. Price moves out of the level boundaries by a few pips, thereby triggering stop losses.
2. Encourages traders to open new positions when the level is broken. When there are enough positions, the price moves in the opposite direction and their stops are triggered.
3. There is often a second approach, i.e. a typical W or M pattern is formed. This is the preferred entry point for most of these trades, especially in the second phase

M and W EDUCATION

Type M SLH (M Formation):

Type W SLH (W shape):

Market makers encourage traders to open trades in the wrong direction, through the use of sharp and aggressive moves near a high or low.

A way to determine that you are in the right place can be when the market will appear to be quiet, in consolidation and make a sharp range exit, simulating a “breakout”.

In these situations, the price moves to the next level to further incentivise positions to be taken in the wrong direction, against what should be the truth of the trend.

Stop hunt should be used along with other factors such as: market structure, order blocks, etc.

The Psychology Behind Liquidity Traps

Liquidity manipulation often relies on one key factor: trader psychology. Retail traders tend to place stop losses just beyond key support or resistance zones.

Smart money — like institutional players — know this. They exploit herd behavior by triggering these clustered orders to create liquidity, not just to grab it.

When a large number of stop losses are activated at once, it creates a flood of market orders.

This gives institutional players the liquidity they need to enter or exit large positions without causing slippage.

The key takeaway? Price doesn’t always move because of fundamental reasons — it often moves to fill big orders.

Fakeouts vs Real Breakouts: Spotting the Difference

One of the biggest challenges for traders is distinguishing a fakeout (common in SLH) from a genuine breakout. Here’s how to tell the difference:

• Fakeouts often occur after a prolonged range or during low volume sessions.
• They tend to quickly reverse after sweeping liquidity (stop losses or highs/lows).
• Real breakouts are usually supported by volume expansion, continuation patterns, or confirmation on higher timeframes.

Always wait for a confirmation candle or a retest of the broken level before jumping into a new trend. Impulsive entries are what the smart money wants from you.

The Role of Smart Money in Liquidity Manipulation

“Smart money” refers to institutions, hedge funds, or large capital players who move the markets. These entities don’t chase the price — they let price come to them.

They build positions over time, often during consolidation phases. When ready, they use engineered liquidity events (like SLH) to grab retail orders, initiate momentum, and then ride the true direction.

If you’re seeing sharp spikes followed by clean trend moves, there’s a good chance smart money is behind it.

How to Protect Yourself as a Trader

If you want to avoid falling into SLH traps:

• Don’t place your stop losses exactly at obvious levels (round numbers, previous highs/lows).
• Consider using alerts rather than immediate entries when levels are broken.
• Learn to identify liquidity pools, and wait for confirmation or entry on the retrace.

Most importantly, don’t trade emotionally. The market is designed to punish impatience.

Final Thoughts: Liquidity is the Fuel of the Market

Understanding SLH and liquidity manipulation isn’t about being paranoid — it’s about being informed. Every candle on the chart reflects a battle between buyers and sellers, often with traps set along the way. By learning to read the footprints of smart money, you’ll avoid common pitfalls and start trading with intention.

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