CHAPTER 14

Liquidation Zones 1-20

A liquidation zone is the price where leveraged positions are force-closed. Knowing them tells you where never to park a stop - and where the best entries hide.

The quick maths: 10x = 10 percent, 25x = 4 percent, 50x = 2 percent, 100x = 1 percent. That distance from entry is your liquidation price, and every chart shows all four lines.

Below Equal Lows

Every long parks its stop five to fifteen pips under the equal low, which makes that band the cheapest liquidity for a seller.

**Fig. 14.1** The zone with its liquidation ladder

Topic	Rule
How it forms	Long stops and liquidations stack in the same band.
What it means	Price entering the band creates forced buy orders.
Your defence	Never place a stop within twenty pips under equal lows.

Above Equal Highs

Shorts put stops just above the obvious high; one wick converts them into forced buying.

**Fig. 14.2** The short liquidation ladder

Topic	Rule
How it forms	Short stops stack above the high.
What it means	Shorting before the sweep ends makes you the fuel.
Your defence	Short only after the sweep and a 5m MSS.

The 100x Micro Zone

At 100x, liquidation sits roughly one percent from entry: ordinary noise ends you.

Topic	Rule
How it forms	Tiny margin means a one percent move triggers a call.
What it means	You get liquidated even when the direction is right.
Your defence	Cap leverage at 5-10x and let the stop set the size.

Weekend Gap Zone

Stops left at Friday close are filled by the Sunday gap, which jumps straight over your stop.

Topic	Rule
How it forms	Nobody guards the book while the market is closed.
What it means	The stop is skipped and filled at the next price.
Your defence	Be flat on Friday, or halve the size.

News Candle Sweep Zone

Spreads widen and both stop clusters fall inside the spike range: right bias, stopped out anyway.

Topic	Rule
How it forms	The spike takes liquidity on both sides.
What it means	The first candle is clearing, not information.
Your defence	No position five minutes either side.

Range Extreme Band

Range traders put stops just beyond the boundary, so the ten percent band outside holds the most stops.

Topic	Rule
How it forms	Stops stack just outside the boundary.
What it means	A false break clears the band then returns inside.
Your defence	Keep the stop more than one range-height away.

Round Number Magnet

Orders cluster on round numbers and stops just beyond them, so price often spikes through and returns.

Topic	Rule
How it forms	1.1000, 2000, 50000 - everyone uses them.
What it means	Breaking the number takes stops, not trend.
Your defence	Put the stop beyond the number, not before it.

Session Extreme Band

The London and New York extremes hold the densest stop clusters of the day, and the next session raids them.

Topic	Rule
How it forms	Session traders use the extreme as invalidation.
What it means	Expect the raid instead of trying to dodge it.
Your defence	Never five pips beyond the extreme.

Thin Liquidity Cascade

Above a fast leg there are almost no resting orders, so each stop triggers the next and the move travels three to five times further.

Topic	Rule
How it forms	Displacement leaves an empty book behind it.
What it means	A small push creates a large move.
Your defence	Do not chase the void; wait for the return to the gap.

Order Block Stop Cluster

The pocket under a bullish OB is the most predictable stop cluster and the cheapest place to fill a large buy order.

Topic	Rule
How it forms	Everyone buying the OB stops out a few pips below.
What it means	A sweep under the OB is often the cleanest entry.
Your defence	Stop fifteen to twenty pips below the OB low.

Educational material only · not financial advice.