Liquidity in ICT/SMC: buy-side, sell-side and sweeps
In ICT/SMC, liquidity means clusters of stop orders above highs and below lows, to which, according to this concept, price is sometimes “drawn.”
English term: Liquidity (buy-side and sell-side)
In the ICT/SMC approach (Inner Circle Trader / Smart Money Concepts), liquidity means clusters of pending orders, mainly stop losses, above obvious highs (buy-side liquidity) and below obvious lows (sell-side liquidity). According to this concept, a large participant needs a counterparty for its trades, so price is sometimes driven into those areas before changing direction.
A liquidity sweep is a brief break of a high or low after which price returns. It is sometimes read as “stop-loss hunting,” but that is only one interpretation, because such breaks can also be ordinary fluctuations. Not every high is a magnet, and entering after a sweep does not guarantee a reversal. Not to be confused with market liquidity, meaning the ease of trading.
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Related terms
Other terms in the “ICT/SMC” category
This entry explains a concept and is not an investment recommendation. Cryptocurrencies and leveraged trading carry a risk of losing money. Risk Warning.
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