ICT / SMC Concepts · Lesson 10
Liquidity
Learn why obvious highs and lows can become important areas where orders may cluster.
What Is Liquidity?
In ICT / SMC-style analysis, liquidity refers to areas where many market orders, stop orders, or pending orders may be concentrated.
Obvious highs and lows are watched because traders commonly place stop losses, breakout orders and pending orders around those visible levels. So these areas may contain clusters of orders.
Buy-Side Liquidity
BSLBuy-Side Liquidity is generally described as liquidity resting above visible highs. It may include:
- stop losses from short positions
- breakout buy orders
- pending orders above resistance
Start with the obvious highs. Now look above them. That area may contain Buy-Side Liquidity.
Buy-Side Liquidity
Two nearby highs. Price trades below them. Nothing is marked yet.
Sell-Side Liquidity
SSLSell-Side Liquidity is generally described as liquidity resting below visible lows. It may include:
- stop losses from long positions
- breakout sell orders
- pending orders below support
Next, find the lows. The area beneath them may contain Sell-Side Liquidity.
Sell-Side Liquidity
Two nearby lows. Price stays above them. Nothing is marked yet.
Equal Highs and Buy-Side Liquidity
You already know Equal Highs. They make a visually obvious area.
Many traders may place stops or breakout orders above those highs. So ICT / SMC traders may view the area above them as Buy-Side Liquidity.
Equal Lows and Sell-Side Liquidity
The same idea, mirrored. Equal Lows can create a visible area where orders may cluster below the lows.
Where Traders Look for Liquidity
Try it. One chart has equal highs, equal lows, a lone swing high and a lone swing low. Four spots are lettered. Answer both questions.
Find the Liquidity: Question 1
Equal highs, equal lows and four lettered spots. Nothing is marked yet.
Where is the Buy-Side Liquidity?
Find the Liquidity: Question 2
The same chart again.
Where is the Sell-Side Liquidity?
Think in Areas, Not Exact Ticks
Liquidity is not always one perfect price. Orders can sit across a nearby region. So use a liquidity area, not an exact liquidity price. That helps you avoid false precision.
What Might Happen?
When price reaches a liquidity area, several things can happen:
Rejection or Break Through?
The same Buy-Side Liquidity above the highs. Two different endings.
Common Mistakes
Marking every high and low as liquidity
Correction: Focus on obvious, meaningful levels.
Thinking liquidity is an exact price
Correction: It is often better treated as an area.
Assuming price must reverse after reaching liquidity
Correction: Price may reject, continue, or consolidate.
Using liquidity as an automatic entry
Correction: Treat it as market context.
Knowledge Check
Knowledge check
Check 1
Equal Highs. Where would Buy-Side Liquidity typically be considered?
Knowledge check
Check 2
Equal Lows. Where would Sell-Side Liquidity typically be considered?
Knowledge check
Check 3
Does price reaching a liquidity area guarantee a reversal?
Knowledge check
Check 4
Which is typically associated with Buy-Side Liquidity?
Your Turn
The chart shows visible Equal Highs and Equal Lows. The liquidity areas are hidden. Four spots are lettered.
Mark the Buy-Side Liquidity
Choose the lettered spot.
Which spot marks the Buy-Side Liquidity?
Mark the Sell-Side Liquidity
The same chart. Now the other side.
Which spot marks the Sell-Side Liquidity?
How to find liquidity
- Step 1: Find obvious highs and lows.
- Step 2: Look for repeated or meaningful levels.
- Step 3: Mark the area above highs as potential Buy-Side Liquidity.
- Step 4: Mark the area below lows as potential Sell-Side Liquidity.
- Step 5: Treat the area as context, not certainty.
Where Can Liquidity Appear?
Liquidity concepts can be applied on many timeframes. The same idea works at different scales. No timeframe is best for everyone.
What You Learned
- Liquidity refers to areas where orders may cluster.
- Buy-Side Liquidity is typically discussed above visible highs.
- Sell-Side Liquidity is typically discussed below visible lows.
- Equal Highs can create obvious Buy-Side Liquidity.
- Equal Lows can create obvious Sell-Side Liquidity.
- Liquidity is usually better treated as an area, not an exact tick.
- Price reaching liquidity does not guarantee a reversal.
LIQUIDITY = WHERE ORDERS MAY BE CLUSTERED. An area of interest, not a guaranteed reversal.
= BUY-SIDE LIQUIDITY
= SELL-SIDE LIQUIDITY