Member-only story
IRL vs. ERL: Predict Market Swings
Liquidity drives the markets — plain and simple. It’s the force behind every price jump, dip, or stall. But here’s the catch: if you don’t know where liquidity hides, you’re guessing your way through trades. Two concepts — Internal Range Liquidity (IRL) and External Range Liquidity (ERL) — changed how I see charts. Once I got these down, I started spotting moves before they happened. Let me walk you through it, step by step, with some practical tricks I’ve picked up over the years.
What’s IRL and ERL All About?
Think of liquidity as a pile of buy and sell orders waiting to get triggered. IRL and ERL are just ways to map out where those piles sit.
- IRL (Internal Range Liquidity): This is the stuff inside a price range — like little pockets where orders stack up. When price swings by, it often bounces or hesitates there.
- ERL (External Range Liquidity): This is outside the range, at the big highs and lows. These spots pull price like a magnet, setting up breakouts or reversals.
I used to trade without caring about this. Big mistake. Now, I lean on IRL and ERL to figure out where the action’s brewing. Let’s dig into each one.
IRL: The Inside Scoop
Internal Range Liquidity is all about those sneaky zones within a price range. They’re packed with pending orders, and when price rolls through, something usually happens — maybe a quick reversal, maybe a pause. Here’s what I look for:
- Order Blocks: Big players drop their orders here. I picture them as a wall of buy or sell tickets waiting to get punched.
- Breaker Blocks: These pop up after price smashes through support or resistance, then swings back to test it. That broken level? It’s now a hotspot.
- Fair Value Gaps (FVGs): Ever see price leap up fast, leaving a blank spot on the chart? That’s an FVG — orders left hanging, ready to snag price later.
Why It’s a Game-Changer
IRL is where the market tidies up loose ends. I’ve watched price hit an order block at $20, reverse, and climb to $22 more times than I can count. It’s not random — it’s orders getting filled.
