Inducement — Trading Glossary

A minor high or low inside a pullback that tempts traders in early and is usually taken out on the way to the main liquidity pool.

The main pool sits under the low a move started from, or under equal lows. The minor lows in between are easy to take and rarely where a reversal starts.

Taught in

Liquidity: Why Price Takes Your Stop FirstStrategy Playbook

Where stop losses pile up, why price is drawn to them, and how to tell a sweep that reverses from a breakdown that keeps going.

Also covered in that lesson

LiquidityOn a chart, the pool of stop losses and pending orders resting just beyond obvious swing highs and lows — the orders price is often drawn to.Liquidity sweepPrice trading just beyond an obvious high or low to trigger the stops there, then closing back inside — a wick through the level, not a close.

Related terms

Liquidity Liquidity sweep