Liquidity: where the stops are

The rules

1. Buy-side liquidity (BSL) rests above swing highs: short sellers' stops and breakout buy orders.
2. Sell-side liquidity (SSL) rests below swing lows: long traders' stops and breakout sell orders.
3. Equal highs and equal lows are the most obvious pools. They are targets, not support or resistance.
4. Price is drawn to liquidity. When one side gets swept, the other side often becomes the target.
5. A sweep takes the stops and closes back inside. That is where reversals start.
6. Trade toward the untaken pool, never into the side that was just swept.

How to mark it

1. Mark the clear swing highs and swing lows on your trading timeframe.
2. Circle any equal highs or equal lows: two or more touches at the same price.
3. Add the previous day high and low, and the current session high and low.
4. Ask which pool is closer and which one was already taken.
5. Wait for one side to be swept, then plan toward the other side.

The 1:3 trade

Entry on the close of the sweep candle back inside the range. Stop below the sweep wick. Target the equal highs, where the buy-side liquidity rests.

Before you enter

• Both pools are marked: highs above, lows below
• One side was swept with a wick, not a body close
• The sweep candle closes back inside the range
• Stop beyond the sweep wick, not at the old low
• Target is the opposite pool with at least 1:2

Common mistakes

• Shorting equal highs as if they were resistance
• Putting your own stop exactly at the obvious swing point
• Trading back into the side that was just swept
• Entering before the candle closes back inside
• Chasing a breakout straight into the next pool

Key terms

• BSL: buy-side liquidity, resting above highs
• SSL: sell-side liquidity, resting below lows
• Equal highs / lows: repeated touches at one price; an obvious pool
• Sweep: wick through a pool, body closes back inside
• Draw on liquidity: the pool price is most likely heading to next
• R:R: reward divided by risk; 1:3 means 3R for 1R risked

Stops sit above highs and below lows. Price hunts them. Let one side get swept, then trade toward the other.