Internal to External 

Introduction

The market moves in waves, creating highs and lows. The terms internal and external liquidity refer to areas where the market attracts participants:

• Internal Liquidity: The liquidity found within a defined range (e.g., during consolidation or retracement). Traders might look for entries here after a pullback.
• External Liquidity: Areas outside the range, typically where stop-loss orders are located, such as major highs or lows. These areas often attract large liquidity grabs or reversals.

The goal is to enter trades as the price shifts from internal to external liquidity, aligning with a trend or reversal strategy.

Key Concepts in the Chart

1. External High/Low:
   • Marked levels where price is expected to target liquidity.
   • The external low is swept (a wick sweep), triggering a reversal toward the external high.
2. Wick Sweep:
   • This represents a manipulation or liquidity grab, where the price dips below the external low to trigger stop-loss orders before reversing direction.
3. Shift:
   • A critical point where the structure begins to change (e.g., from a downtrend to an uptrend).
   • This marks the first indication of potential reversal or trend continuation.
4. Break of Structure (BOS):
   • A confirmation of a trend change, often aligning with internal entries or continuation points.
5. Internal Entry:
   • A re-entry into the trade within the newly formed structure after BOS, typically with tighter stops and better risk-reward.

Trade Setup Ideas

1. Scenario 1: Bullish Reversal Setup
   • Entry: Wait for a wick sweep below the external low (liquidity grab). Look for confirmation via a shift in structure.
   • Stop-Loss: Below the wick sweep or the external low.
   • Take Profit: Target the external high, where liquidity is likely to be taken.
2. Scenario 2: Continuation Setup
   • Entry: After the BOS, enter on a retracement into the internal structure (internal entry).
   • Stop-Loss: Below the recent low post-BOS.
   • Take Profit: Extend to the external high or beyond if the trend continues.
3. Scenario 3: Countertrend Setup
   • Entry: Look for a sweep of the external high, signaling a potential reversal.
   • Stop-Loss: Above the external high wick.
   • Take Profit: Internal levels within the range or external low.

Tips for Trading This Concept

• Combine this framework with volume profiles, order blocks, or supply and demand zones for better precision.
• Use lower timeframes for refined entries but confirm the trend with higher timeframes.
• Manage risk diligently: trade smaller lot sizes during wick sweeps and high-volatility moments.