LiquidityIntermediate

Liquidity Void

What a liquidity void is, how it differs from a fair value gap, why price often returns into it, and when it does not.

Library categories

What it means

A liquidity void is a price range crossed by one or more large, one-directional candles with little trading back and forth. On the chart it looks like a long run of overlapping-free bodies.

A fair value gap is a specific three-candle version; a void can span several candles.

Why traders use it

Because little trading happened inside the void, traders expect price to return later to "rebalance" it. That gives potential pullback areas and targets.

Voids also show urgency: whoever moved price there did so aggressively.

Chart examples

A void and its later rebalance

One-sided moveRebalancedLiquidity void
Three large candles leave an area with almost no two-way trading; price later returns into it.Schematic diagrams drawn to explain the idea; they are not market data.

How to identify it objectively

  • 1Find a sequence of large candles in one direction with little overlap.
  • 2Mark from the start of the first large body to the end of the last.
  • 3Note the 50% level of the void.
  • 4Track whether later price fills it partly, fully or not at all.

Bullish use

  • 1A bullish void forms in an uptrend.
  • 2Price retraces into it, often to around half.
  • 3A bullish reaction there can continue the move.

Bearish use

  • 1A bearish void forms in a downtrend.
  • 2Price rallies back into it.
  • 3A bearish reaction there can continue the move down.

What confirms it

  • The void formed with displacement.
  • Reaction inside it on the retracement.

What invalidates it

  • Price fills the void completely and keeps going through its origin.

How a hypothetical setup is built

Entry

On a retracement to the void's midpoint with a reaction in the trend direction.

Stop

Beyond the start of the void.

Target

The high (or low) made after the void.

A hypothetical illustration of how the concept is turned into a plan, not a recommendation. Practise it on a paper account first.

Historical testing

Not tested on The Tradeskill yet.

Limitations: when it fails

  • Some voids are never revisited.
  • Defining "little overlap" needs a fixed rule.
  • In news-driven moves voids can fill violently.

Knowledge check

Pick an answer to see the explanation. Nothing is saved.

How is a void different from an FVG?

1. How is a void different from an FVG?

Why do traders expect price to return into a void?

2. Why do traders expect price to return into a void?

What invalidates a bullish void as support?

3. What invalidates a bullish void as support?

Practise it risk-free

Open the free chart, use replay to go back in time and look for this concept candle by candle with $20,000 in virtual money.