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While newbie traders usually ignore such formations, they are very important.

Candlestick Pattern Meaning

Such sideways weak price action will signify a silent institutional accumulation of trading volumes.

Such accumulations require market liquidity, so they will always occur on liquidity clusters.

The entire range of such an accumulation will represent a significant liquidity zone.

Example

Below is an example of such a liquidity cluster on EURCAD forex pair.$BTC

Candle 4

And the final liquidity candlestick pattern that you must know is a cluster of low momentum and average candles.

Analysing different markets, very often you will see clusters of even 10 low momentum candles.$BNB

The low of this candle will indicate a significant demand cluster.

Example

I found a perfect example of a high momentum bullish candle on NZDUSD forex pair.
$BTC

Candle 3

The third liquidity candlestick we will study is a momentum candle.

This candle has a huge body in comparison to average candles.

High Momentum Bullish Candle Structure

A high momentum bullish candle will signify a strong buying imbalance.

It should have a big green body.$BNB

Check the example of a liquidity supply zone based on a bearish rejection cluster on EURAUD forex pair.
$BTC

Examples

Below is the example of a demand zone based on a bullish rejection cluster on GBPJPY.

$BTC

Multiple rejections from the upside will compose a supply cluster.
$BNB

Rejection Cluster

There will be cases when rejection candles will cluster, forming 2, 3, 4 or even more rejections in a row.

Such a cluster will indicate tests of a significant liquidity zone.

In that situation, a liquidity zone will be based on all the rejection wicks.

Multiple rejections from the downside will compose a demand cluster.
$XRP

First, the price rises rapidly, driven by the excess of demand.
Then, the market finds a supply cluster and reverses quickly, forming a long upper wick.

The low of this candle will signify a concentration of supply.

Example

Examine an example of a bearish rejection on GBPUSD.$BNB

Candle Structure & Bearish Rejection

A bearish rejection is a formation of a long upper wick.

A lower wick will be called a bullish rejection.

The logic is simple.

First, the price is falling sharply because of the excess of supply.

Then, the market finds a demand cluster and reverses quickly, forming a long lower wick.
The low of this candle will signify a concentration of demand.

Example

Below is an example of the occurrence of a bullish rejection on GBPUSD forex pair.

Candle 2

The second liquidity candlestick you should know about is a rejection candle.

Candle Structure & Bullish Rejection

This candle has a long wick in comparison to its body$BTC

All such doji's will compose a liquidity zone.

Example

Below is an example of such a doji cluster on GBPAUD forex pair.

Doji Cluster

There will be situations when doji candles will cluster, forming 2, 3, 4 or even more such candles in a row.

Dojies can also be accompanied by weak, low-momentum candles.
Such a cluster will provide even stronger evidence of a test of a significant liquidity zone.

A formation of such a candle means a buying imbalance and an excess of demand.

Doji candle formation will signify that such an excess of demand was finally absorbed by supply.

The price tested a liquidity pool, and equilibrium was found.

Liquidity Supply Zone

A liquidity zone will be based on the area from the high of the candle to its body$BTC

Supply & Demand Analysis

Now, imagine the opposite case scenario: the price forms a strong bullish candle.

Above is an example of a liquidity demand zone based on a doji candle on EURGBP forex pair.In this case, it will be a zone from the low of the candle to its body.

Example

Imagine that you see a strong bearish candle.

Why does such a candle form?

It happens because of the excess of the market supply.

Selling pressure is way stronger than buying interest; for that reason, the price is falling.

But if a doji candle forms afterward?

What does it signify?

It will mean that the excess of the market supply was finally absorbed by demand.

The market found equilibrium, testing a liquidity zone.
And doji candle nicely confirms that.

Liquidity Demand Zone

But where exactly will be a liquidity zone?$USDC