Buy-Side and Sell-Side Liquidity in ICT: Where Stops Rest
Buy-side liquidity is the pool of buy orders resting above a high; sell-side liquidity is the pool of sell orders resting below a low. In ICT’s framework these pools are where price is likely to travel next, because large participants need the other side of the market to fill their orders.
Beginner · 10 min read · Updated
What you will learn
Locate the pools of buy-side and sell-side liquidity on a chart and explain why price is drawn towards them.
Read first: Market Structure in ICT: Swing Highs, Swing Lows and Breaks of Structure
What sits above highs and below lows
Above an obvious high you find buy stop orders from traders who are short and protect their position, plus buy stop entries from breakout traders. Together they form buy-side liquidity (BSL). Below an obvious low you find sell stops from traders who are long and sell-stop entries from breakout sellers: sell-side liquidity (SSL).
A stop order becomes a market order once its price is reached (see the CFTC glossary). When many stops sit at the same place, reaching that place can trigger a burst of market orders and a fast move.
You cannot see these orders
Stop orders are generally not displayed in the visible order book, so no platform shows you the exact size of a liquidity pool. Liquidity in this sense is an inference from chart structure: the more obvious a high or a low, the more likely it is that orders rest beyond it. Keep that limit in mind; it is the reason why every liquidity target needs a plan for the case where price ignores it.
The most watched pools
- Equal highs and equal lows (relatively equal, not necessarily to the tick): two or more swings at the same price are an obvious place for stops.
- Previous day high and low, and previous week high and low.
- Session highs and lows, for example the Asian range before the London session.
- Old swing highs and lows that price has not revisited.
Hypothetical example · Equal lows
Price makes two lows at 101.02 and 101.00 an hour apart. Sell-side liquidity is likely to rest just below 101.00. A trader long from above would not place a stop exactly there, but slightly lower or beyond the next structure, precisely because that level is an obvious target.
Draw on liquidity
The draw on liquidity is the pool that price seems to be heading for. In a bullish context the next buy-side pool (an old high, the previous day high) is the natural target; in a bearish context, the next sell-side pool. Choosing the draw is a judgement call based on the higher-timeframe structure from the market structure lesson; write the reason for your choice before the session starts.
Liquidity and position management
The same logic applies to your own trades. A stop placed exactly at an obvious level sits inside a pool that others may target. Placing it beyond the structure that invalidates your idea, then sizing the position from that distance, is more robust than tightening it to the nearest obvious level. The position size calculator converts that distance into a number of contracts.
Ranking the pools before the session
A chart always shows several possible pools. A simple way to rank them is to score each one on four questions, one point per “yes”:
- Is it obvious (equal highs or lows, a previous day or week extreme)?
- Was it formed on a higher timeframe?
- Has price not traded through it yet?
- Is it in the direction of your higher-timeframe bias?
Hypothetical example · Scoring three pools
The previous day high is obvious, daily, untouched and in the direction of a bullish bias: 4 points. Equal lows formed on the 5-minute chart this morning are obvious and untouched but against the bias: 2 points. An old weekly low that price already traded through last week is obvious and weekly, but already taken and against the bias: 2 points. The previous day high becomes the main draw, the equal lows a possible sweep before the move.
The score is not a probability. It is a way to make your choice explicit, so that you can later check in your journal whether high-scoring pools were reached more often than low-scoring ones.
Common mistakes
- Treating every high and low as a target: prioritise the most obvious and the closest to the higher-timeframe draw.
- Expecting price to reverse at a pool: a pool can be taken and price can continue.
- Assuming the order book shows the pool: stops are not visible.
Practice exercise
On a 15-minute chart of the last two sessions, mark the previous day high and low, the Asian range high and low and any equal highs or lows. Rank them from the most to the least obvious and choose a draw on liquidity for the next session, with one sentence of justification.
Check your understanding
1. Where does buy-side liquidity rest?
- Below swing lows
- Above swing highs
- At the session open
Show the answer
Answer: Above swing highs. Buy stops from short sellers and breakout buyers rest above highs.
2. Why are equal highs considered a liquidity pool?
- Exchanges publish them
- They are an obvious place for stop orders
- They always stop the price
Show the answer
Answer: They are an obvious place for stop orders. Their obviousness makes them a likely location for stops.
3. Can you see the size of a liquidity pool in the DOM?
- Yes, in the bid column
- Yes, in Time and Sales
- No, stop orders are generally not displayed
Show the answer
Answer: No, stop orders are generally not displayed. Liquidity pools are inferred from structure, not read in the order book.
Practise with the free tools
Frequently asked questions
Is buy-side liquidity the same as resistance?
Not exactly. Resistance is a level where selling is expected; buy-side liquidity is the pool of buy orders above a high. Price is often drawn towards it rather than rejected by it.
What is a liquidity pool in ICT?
A price area where many orders are likely to rest, typically beyond equal highs or lows, previous day or week extremes and session ranges.
What does “draw on liquidity” mean?
The liquidity pool that price is expected to reach next, chosen from the higher-timeframe context.
Related lessons
References and further reading
- CFTC Glossary (stop order, limit order, market order) — U.S. Commodity Futures Trading Commission
- The Inner Circle Trader — official YouTube channel — Michael J. Huddleston
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