Highs and lows: why price reaches for them
A first lesson for new traders: where orders wait above highs and below lows, why price travels to them, and why a level stops mattering once price trades through it.
This is the first lesson in the series. It assumes no trading experience.
Also called liquidity, resting orders, or stop clusters in other trading material.
Every trade needs another side
Every time someone buys, someone else sells to them. A large buyer can only buy as much as sellers are offering at that moment, so what matters is how many waiting orders sit at each price. Some prices have many. Most have few.
Large traders need many orders on the other side to fill their own, so price tends to travel to the places where orders are waiting. Learning where those places are is the first skill in this library.
Where orders wait
Most waiting orders sit just past levels that everyone can see on a chart:
- Highs and lows. A high is the top of a move before price turned down. A low is the bottom of a move before it turned up.
- Equal highs or equal lows. Two or more tops (or bottoms) at nearly the same price. They look like a ceiling or a floor, so many traders place orders right past them.
- The prior day's high and low. Almost every trader marks these, so orders pile up just beyond them.
Where orders wait
Orders gather just above highs and just below lows.
A price path with equal highs, a swing low, and the prior day’s high and low, and the orders resting beyond each one.
Traders park stop orders and breakout orders just past the levels everyone can see. Price often travels to those clusters because that is where it can find the other side of large trades.
- Orders above the highs
- Orders below the lows
- Visible highs and lows
Two kinds of orders gather there:
- Stop orders. A trader who sold short places a stop just above a high, to get out if price rises past it. A trader who bought places a stop just below a low.
- Breakout orders. Other traders place orders to buy if price rises above a high, or to sell if it falls below a low.
So above a high you tend to find orders to buy, and below a low you tend to find orders to sell: clusters of waiting orders just beyond obvious highs and lows.
Why price reaches for these levels
Imagine a large trader who wants to sell. Selling a lot at once is hard unless many buyers show up at the same time. Just above a high, a pile of buy orders is waiting: stops from short sellers and breakout buys. If price trades up into that pile, those buy orders fill, and the large seller can sell into them.
This is why price often pokes through a high or a low and then turns around. It is not magic and it does not always happen. It is simply where the orders are.
Taken levels and untouched levels
Once price trades through a level, the orders that were waiting there are filled. The level has done its job. It stops pulling price toward it.
A level that price has not reached yet still has its orders. That untouched level is usually the next one worth watching.
Taken or untouched
Once price trades through a level, its orders are gone.
On the left, price runs above a high and closes back below it. On the right, a low that price has not reached yet.
A level that has been traded through has already filled its orders, so it stops pulling price. A level price has not reached still has them. That untouched level is usually the next one to watch.
- Taken: the run above the high
- Untouched: orders still waiting
- Levels
A simple habit follows from this. Before you look for a trade, mark:
- The highs and lows price has already traded through today (taken).
- The nearest highs and lows price has not touched yet (untouched).
The untouched levels are where the next move is likely to be tested.
What happens when price reaches a level
Price trading through a high or low can lead to one of two things:
- It keeps going. The candle closes beyond the level and price continues. That is a breakout.
- It turns back. The candle reaches past the level, then closes back inside. The orders filled, but price did not stay out there. That is a sweep.
Telling these two apart, and knowing when a sweep matters, is the subject of the next lesson.
How FMP+ uses this
FMP+ is built on this idea. Its model looks for a higher-timeframe candle that sweeps the prior candle's high or low and closes back inside, at a level that matters. On the chart it names the swept level, for example 4H low · 7592.00 swept, and it can mark the prior day's and prior week's highs and lows for you (the key levels, off by default).
Checklist
- Can you point to the nearest high and the nearest low on your chart?
- Are there equal highs or equal lows nearby?
- Where are the prior day's high and low?
- Which of these levels has price already traded through today, and which are untouched?
FAQ
Are waiting orders the same as volume?
No. Volume counts trades that already happened. Waiting orders have not been filled yet.
Does price always go to the nearest untouched level?
No. These levels show where orders are likely waiting, not where price must go. Treat them as places to watch, not as predictions.
Do I need special tools to find these levels?
No. You only need to mark highs, lows, and the prior day's levels on a normal candlestick chart.
This lesson is education, not financial advice. Trading futures involves substantial risk of loss.
The product behind the lesson
See this on your own chart with Fractal Model Pro+.
Fractal Model Pro+ is the TradingView indicator that marks the sweep, the close back inside, the trigger close, and the D1 to D4 map for your chart and model timeframes, in the same reading order this lesson follows. Access is invite-only and tied to your TradingView username. It is educational software: it places no trades and makes no outcome claims.
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