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What are liquidity pools in forex and why do they matter?

Liquidity pools are price zones where large numbers of stop-losses and pending orders accumulate. Institutions often target these pools to trigger liquidity and enter positions with minimal slippage. For example, a cluster of stops below 1.2000 in EUR/USD may act as a magnet before reversal. Retail traders can identify pools by analyzing support/resistance and round numbers. Benefits: anticipating liquidity hunts improves timing. Risks: false assumptions about pool size may cause misjudgment. Liquidity pools explain why price often overshoots key levels—it’s about harvesting orders before the next move.