ERL & IRL
Inside any range there are two kinds of liquidity: the edges (swing high and low = ERL) and an FVG in the middle (IRL). Price draws back and forth between them, and that cycle gives you a higher-timeframe bias for where it is likely to go next.
ERL and IRL describe where the liquidity sits inside a range. Internal range liquidity (IRL) is a fair value gap inside the range. External range liquidity (ERL) is the high or the low of the range, in other words a swing high or a swing low. Always remember it this way: IRL is the FVG, ERL is the swing high or swing low.
- IRL (internal range liquidity): a fair value gap sitting inside the range. Remember the FVG lesson? That gap is the IRL.
- ERL (external range liquidity): the edge of the range, a swing high above or a swing low below.
As price rallies it leaves a gap between candles: a fair value gap. An FVG that sits inside a range is the Internal Range Liquidity, the IRL.
Spot it: A 3-candle gap (the FVG from the earlier lesson) inside the range = the IRL.
The cycle in one line
From an IRL price draws to the ERL; from an ERL it draws back to the IRL. That back-and-forth is the draw on liquidity, your higher-timeframe bias.
Trading the cycle: ERL to IRL
Here is the cycle in action. Price takes out a swing high (the ERL), grabbing the liquidity above it. Once that ERL is taken, the next draw is the IRL, the FVG. You drop to the lower timeframe, wait for confirmation, then trade toward the FVG.
Set the scene: earlier price left an FVG (the IRL) and built a swing high (the ERL). By the cycle, we expect the draw to move between them.
Spot it: Spot the FVG (IRL) and the swing high (ERL) before anything moves.
Confirm on the lower timeframe
When a higher-timeframe PDRA (like the FVG) is hit, drop to the lower timeframe and wait for confirmation. A reversal there tells you it was only a retracement, so you can enter toward the next ERL. If price instead violates the FVG (the IRL), treat that as the IRL no longer holding, and look for it to draw to the ERL instead.
How pros apply it
- IRL to ERL (AUDUSD): the IRL was an FVG. After it was taken, they dropped to the 1-hour, got confirmation that price would fall, entered, and targeted the ERL.
- ERL to IRL (NASDAQ monthly): a swing high (ERL) was taken out. The next target became the FVG (IRL) lower. They got confirmation and entered short.
- ERL to IRL again: after taking out a high, they entered on the lower timeframe going lower, targeting the FVG (IRL).
Nearest is most probable, not guaranteed
The nearest liquidity (the closest ERL or IRL) is the most probable draw, but it is never guaranteed. That is exactly why you confirm on the lower timeframe before you enter, instead of assuming price must go there.
Key takeaways
IRL is the FVG inside the range. ERL is the swing high or low at the edges. The draw on liquidity cycles IRL to ERL to IRL, and that cycle is your higher-timeframe bias. Trade it by waiting for the PDRA to be hit and confirming on the lower timeframe. The nearest pool is most probable but never guaranteed.
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