Liquidity in Forex Trading — Buy-Side vs Sell-Side Liquidity Explained (ICT) + Free PDF
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Liquidity in forex trading is the availability of willing buyers and sellers at the market price. In ICT terms, it specifically refers to the pending buy stops resting above old highs (buy-side liquidity) and the pending sell stops resting below old lows (sell-side liquidity) — the pools that market makers target to fill institutional orders.
In this guide I walk you through the meaning of liquidity, the two types (buy-side vs sell-side), the liquidity hunt mechanic, why this is the primary driver of price, and how to read it like a pro.
What is Liquidity in Forex Trading?
The word liquidity itself means convertible to cash.
The liquidity of an asset is marked high if it can easily be sold and converted to cash.
In forex trading, liquidity means the availability of willing buyers and sellers at the market price. If someone wants to buy an asset there should be a seller of that asset, and for a seller there should be a buyer.
Liquidity makes it easy for the market to operate effectively.
Liquidity in the forex market is measured by the volume of active or pending orders in the market. Market makers mostly try to hunt the liquidity of retail traders — and that hunt is the engine of price delivery.
Types of Liquidity in Trading
As there are two types of orders in trading — buy and sell — liquidity is also of two types: buy-side and sell-side.
Buy-Side Liquidity (ICT)
Buy-side liquidity, according to the inner circle trader (ICT), is the volume of pending buy orders (buy stops).
When traders execute a sell order they often want to protect it with a buy order in case price moves against them.
So they use a buy stop to protect their capital and hedge against loss.
Anyone selling at a price level will have a buy stop placed above that price.
So buy stops rest above highs — and that is why old highs like weekly highs, daily highs or equal highs are termed buy-side liquidity.
Market makers try to grab these highs to convert the pending orders into market orders, and then move the market against them.
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In this way they make profit from retail traders, and this is termed a liquidity hunt.
In the picture above you can see equal highs that are termed buy-side liquidity. Market makers swept the old highs clearing buy-side liquidity, then moved the market down against the pending orders — a perfect example of a buy-side liquidity hunt.
Sell-Side Liquidity (ICT)
Sell-side liquidity, as defined by the Inner Circle Trader (ICT), refers to the accumulation of pending sell orders — particularly sell stop orders.
When traders initiate buy orders, they often seek to safeguard their positions by placing corresponding sell orders to mitigate potential losses.
Sell stop orders serve as a protective mechanism, activated if the price declines beyond a certain threshold.
Typically, traders position sell stop orders below significant price levels — such as historical lows, including weekly lows, daily lows or equivalent benchmarks.
These levels are deemed to contain sell-side liquidity due to the concentration of pending sell orders.
Market makers attempt to exploit this liquidity by targeting these established lows to trigger the activation of sell stop orders, effectively converting them into market orders.
Subsequently, they capitalise on this influx of market orders to manipulate the market in the opposite direction, thereby profiting from the actions of retail traders.
In essence, the concept of sell-side liquidity underscores the strategic interplay between traders and market makers, with sell stop orders serving as pivotal instruments in this dynamic process.
In the picture above you can see established lows with sell stops resting below them. Price after clearing the lows and sell-side liquidity moved into the buy side — a perfect example of a sell-side liquidity hunt.
Buy-Side vs Sell-Side Liquidity (Side-by-Side)
The two types are mirror opposites. Use this side-by-side as a quick reference.
- Buy-side liquidity — buy stops above old highs (weekly, daily, equal highs). Filled when price runs above the level. Market makers sweep it then sell into it, reversing lower.
- Sell-side liquidity — sell stops below old lows (weekly, daily, equal lows). Filled when price runs below the level. Market makers sweep it then buy into it, reversing higher.
The most important practical rule: in a bullish higher-timeframe bias, expect price to sweep sell-side liquidity (below an old low) before continuing up. In a bearish higher-timeframe bias, expect price to sweep buy-side liquidity (above an old high) before continuing down.
Why Understanding Liquidity is Important
By the discussion above you have understood the meaning and types of liquidity in forex trading, and you also know that market makers look to hunt liquidity.
The market, after hunting liquidity on one side, moves to hunt the liquidity on the other side — as you can see in the picture below.
So liquidity is the primary cause of price movement.
As a trader, if you do not know about liquidity in the market, you can become the liquidity yourself. To be a profitable trader you should know and spot the liquidity in the market and try to go with the flow of market makers.
Step-by-Step Liquidity-Reading Workflow
This is the exact sequence I run before any trading session to map liquidity correctly.
- Set the higher-timeframe bias. Daily and H4 — bullish, bearish or neutral.
- Mark the previous day high and previous day low. The most recent buy-side and sell-side pools.
- Mark the previous week high and low. The next-tier pools above and below.
- Mark relative equal highs and lows. Internal liquidity inside the range.
- Identify the next draw-on-liquidity. Above (buy-side) or below (sell-side) — guided by the bias.
- Wait for the sweep. Price must wick through the level and close back inside the prior range.
- Confirm with structure. A lower-timeframe Market Structure Shift after the sweep is the trigger.
- Take entry, stop and target. Entry on the retest of the PD array, stop beyond the swept level, target the opposite-side pool.
Best Markets for Reading Liquidity
Liquidity is universal across markets, but the cleanest signatures print on a specific subset.
- NQ (NASDAQ futures) and ES (S&P 500 futures) — institutional flow is concentrated, so buy-side and sell-side pools are unambiguous.
- GBP/USD and EUR/USD — relative equal highs and lows form constantly during the London-NY overlap.
- XAU/USD (Gold) — large stop runs around US economic releases (NFP, CPI) deliver textbook liquidity hunts.
For traders in the United States who follow the CFTC FIFO and no-hedge rules, the liquidity model maps directly onto NQ and ES futures (CME Group). The 09:50 NY-AM macro window is a particularly strong place to read liquidity hunts because the algorithm is most active there. The model also maps onto regulated forex pairs through US-based brokers — the mechanic does not change, only the instrument.
Common Mistakes Reading Forex Liquidity
These are the recurring mistakes I see when traders first start working with the liquidity framework.
- Treating every old level as liquidity. Only the meaningful, untouched levels matter — relative equal highs/lows, weekly highs/lows and prior day highs/lows.
- Front-running the sweep. Pre-positioning before price reaches the level removes the entire liquidity-hunt mechanic from your trade.
- Confusing pool with sweep. The liquidity pool is the resting orders. The sweep is the action of taking them. Both terms are related but not identical.
- No higher-timeframe context. A buy-side sweep on a bearish daily is a setup for a continuation lower. The same sweep on a bullish daily is a continuation higher. Context decides the direction.
- Over-trading liquidity sweeps. Not every sweep is a setup. The cleanest sweeps come at structural extremes — not in the middle of the range.
- Ignoring news. A red-folder release inside the sweep window distorts price and routinely turns a clean read into a stop-out.
Liquidity in Forex PDF Download
You can download below ICT liquidity in forex in PDF for free. This PDF is sponsored by ICTPDF.COM.
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FAQs about Liquidity in Forex Trading
Brief answers to the questions readers ask most often about liquidity.
What is liquidity in forex trading?
Liquidity is the availability of willing buyers and sellers at the market price. In ICT terms, it specifically refers to the pending buy stops above old highs (buy-side) and the pending sell stops below old lows (sell-side) that market makers target.
What is buy-side liquidity?
Buy-side liquidity is the cluster of pending buy stops resting above weekly highs, daily highs or relative equal highs. It is the pool that market makers sweep when price breaks above an old high.
What is sell-side liquidity?
Sell-side liquidity is the cluster of pending sell stops resting below weekly lows, daily lows or relative equal lows. It is the pool that market makers sweep when price breaks below an old low.
What is the difference between buy-side and sell-side liquidity?
Buy-side liquidity sits above old highs (buy stops). Sell-side liquidity sits below old lows (sell stops). Market makers hunt the side that aligns with the next draw on liquidity, which is determined by the higher-timeframe bias.
What is a liquidity hunt?
A liquidity hunt is the action of market makers sweeping a pool of resting orders (above an old high or below an old low) to convert pending stops into market orders, then moving price against those orders to fill the institutional position.
Why is liquidity important in forex?
Liquidity is the primary cause of price movement. The market rotates between hunting one side of liquidity and the other, so reading liquidity correctly tells you where price is most likely to go next.
How is liquidity measured in forex?
Liquidity in the forex market is measured by the volume of active and pending orders. ICT-style readers focus on the location of pending orders — buy stops and sell stops — rather than the absolute volume number.
Where do buy stops rest in forex?
Buy stops rest above weekly highs, daily highs and relative equal highs. These levels are the buy-side liquidity pools.
Where do sell stops rest in forex?
Sell stops rest below weekly lows, daily lows and relative equal lows. These levels are the sell-side liquidity pools.
How do market makers hunt liquidity?
Market makers run price through an old high or old low, triggering the resting stops, which become market orders that fill the institutional position. Once filled, price reverses against the just-triggered orders.
What is liquidity in ICT?
In ICT terminology, liquidity is the location of pending orders — buy-side above old highs and sell-side below old lows. The ICT framework treats liquidity as the primary cause of price delivery.
✨ Update: I've launched my ICT Trading Strategies PDF eBook! Check it out at ictpdf.com .
Let me see if i understood, for example the bearish liquidity seep:
1. retail traders put sell pending orders waiting for reversals below and close to a previous hight.
2. They also put buy stop orders above these hights as a mean of protection (stop loss)
3. Institutional traders need buyers and sellers as their orders are too big to be handled by the market. I mean if they also sell at these below previous hights level there wont be enough buyers to fill their orders, is that right?
4. So to find buyers they buy all the pending orders just below the hight at market price, though moving the price higher.
5. When the price reaches certain level above the mentioned high, they start selling at market price, and the ones who buy are the retail traders with their stop loss sell stop orders.
6. In the previous move (4+5) the institutional traders got a profit from the buy below the high and selling above the high, is this true?
7. As a consequence of this selling at market price, price then goes back below the mentioned high
Is this described process correct?
I guess the process continues with the institutional traders selling more and more at market price to move the price down into a previous low and target the buy limits and sell stops of retail traders.
Appreciate your comments,
Thanks
Yes exactly right
Jadi Pak Ayub kita sebagai retail..harus bgm?menempatkan posisi buy atau sell di mana?
nda perlu mempelajari konsep TIK dan menguasai satu atau lebih strateginya untuk melakukan pemesanan beli atau jual,
Assalamualaykum,
Ayub sir , i have confusion that how to start the trade
i normally do 1 hrs marking in previous day high and low and trading in 15 min
but i always get hitted stop loss.
Please tell to how to start the trade.
first of all you should have a correct Daily Bias and after that you can use the ICT Intraday Profiles for intraday trading and for scalping you can look for the silver bullet or follow ICT 2024 Mentorship – Lecture 1 Notes
The market sweeps liquidity, CISD, gives an entry, and all other criteria are met, but then it sweeps again. What’s the solution to this issue?
Note: I take entries on the 4-hour timeframe, so time isn’t the issue.
Use Market Structure Shift instead of CISD.
You will see improvements
Hello, I use the 1D timeframe as my main one, with the 4-hour, 1-hour, and 15-minute timeframes for confirmations, and the 1-minute timeframe for microstructure. I have read your articles on liquidity, but I still don’t fully understand one thing about identifying liquidity:
1️⃣ PDL (Previous Day Low) and PDH (Previous Day High)
They are considered Internal Range Liquidity (IRL) because they represent liquidity within the daily range.
They can also be Liquidity Pools (LP) because they accumulate stop-loss orders.
If the price sweeps them, a Liquidity Grab or Liquidity Sweep occurs.
They can also act as SSL (Sell-Side Liquidity) or BSL (Buy-Side Liquidity), depending on the trend.
2️⃣ PWL (Previous Week Low) and PWH (Previous Week High)
They are considered External Range Liquidity (ERL) because they represent liquidity outside the daily range.
They are also BSL or SSL zones depending on the trend.
They can be HRLR (High-Resistance Liquidity Run) if the price sweeps them aggressively and then reverses direction.
3️⃣ PMH (Previous Month High) and PML (Previous Month Low)
They are External Range Liquidity (ERL) since they are outside the weekly and daily range.
They can also be BSL or SSL if the price uses them to induce liquidity before reversing.
Generally, these zones mark stronger Liquidity Grabs or Sweeps and can indicate larger trend reversals.
Is what I’m saying correct?
Yes absolutely right
Retail liquidity is not targeted, retail has little volume in the market. Tricky and cool ict. Tricky man.
Retail liquidity matters not because of trade volume but because of stop-loss density. When tens of thousands of retail traders place stops just above a swing high or below a swing low, those stops cluster in a predictable area. Smart Money targets that pool to fill its own large orders. Volume is irrelevant; what matters is the stops sitting at known structural levels.
Yes
Glad it helped.