Latent Liquidity: Institutional orders accumulating at key levels (blue zones)
Transient Liquidity: Short-term liquidity shifts (red areas)
Latent liquidity represents longer-term, aggregated liquidity, where institutional orders accumulate over time. These orders are not always visible but react dynamically when price reaches specific levels. Many traders think of ‘key levels’ as static, but real liquidity zones shift in real-time based on order flow and execution dynamics.
Transient liquidity is short-term and fluctuates based on real-time order flow, market maker hedging, and dealer positioning. It plays a crucial role in intraday trading, where hedging adjustments and options expiration flows can create rapid shifts in liquidity pockets. This behavior is often visible in fast 0DTE (zero days to expiration) trades.