Internal vs External Range Liquidity
The market moves from liquidity pool to liquidity pool. Internal range liquidity (IRL) sits within structural legs — the minor highs, lows, and zones that fuel pullbacks. External range liquidity (ERL) sits outside the range — the key swing highs and lows that impulsive phases target.
Internal Range Liquidity (IRL)
- Within the structural range (inside impulsive/pullback legs)
- Minor highs, lows, and S/D zones on lower timeframes
- Targeted during pullback phases for fuel
- Use as partial profit targets and stop adjustments
External Range Liquidity (ERL)
- Outside the structural range (key swing highs and lows)
- Buy-side (above highs) and sell-side (below lows)
- Targeted during impulsive phases
- Best used as trade targets on higher timeframes
The IRL → ERL Cycle
Impulsive Phase → Targets ERL
Price moves toward the previous swing high/low, consuming ERL
Pullback Phase → Uses IRL as Fuel
Price sweeps internal lows/highs and zones within the leg, creating new IRL
New Impulsive Phase → Targets Next ERL
Fueled by IRL from the pullback, price targets the next swing high/low
Side-by-Side Comparison
| Feature | Internal (IRL) | External (ERL) |
|---|---|---|
| Location | Within structural range legs | Outside structural range (swing H/L) |
| Consists of | Minor highs/lows, LTF S/D zones | Key swing highs/lows, buy/sell stops |
| Targeted during | Pullback phases | Impulsive phases |
| Trading use | Partial profits, stop adjustments | Primary trade targets |
| Cascade rule | 1-2 zones fail → rest likely follow | N/A — singular target levels |
| Timeframe | Lower TF structure within HTF legs | Same TF as structural range |
| Sweep = fake-out? | Normal — IRL sweeps are expected | Can be — needs hard close confirmation |
Catalyst for Pullbacks
A catalyst for pullback is any IRL or ERL point that causes a reaction. When price interacts with a previous supply/demand zone or structural level, it creates a pullback. These pullbacks exist for one reason: liquidity generation to fuel the next move.
IRL catalysts: Internal lows + demand zones (bullish pullback) or internal highs + supply zones (bearish pullback)
ERL catalysts: Key swing highs/lows above or below the structural range
Frequently Asked Questions
How do I identify IRL on a chart?
Drop to a lower timeframe and look at the structure within the higher timeframe leg. Every minor swing low in a bullish impulsive leg is IRL. Every minor supply zone within that leg is IRL. Mark them as potential targets during the pullback.
Can ERL be swept without a real break of structure?
Yes — this is exactly why hard close candle confirmation matters. Price can wick below a swing low (sweeping ERL) and reverse. Without a close break, the sweep is a liquidity grab, not a BOS.
What does "1-2 zones fail, rest follow" mean practically?
In a bullish reversal, once 1-2 supply zones within the pullback leg fail, momentum is strong enough that the remaining supply zones in that leg will likely also fail. This means you can hold through minor reactions with confidence once the first zones break.
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