What "liquidity" actually means
Liquidity is simply resting orders. Above an obvious high sit buy stops (from shorts protecting risk and breakout buyers) — that's buy-side liquidity. Below an obvious low sit sell stops — that's sell-side liquidity. Large participants need these pools to fill size, so price is frequently drawn toward them. Understanding this flips the chart: instead of chasing a breakout, you ask "what is price reaching for?"
BSL & SSL on the chart
Liquidity sweeps & reversals
A liquidity sweep is when price spikes just beyond a high or low, triggers the resting stops, and then sharply reverses. It looks like a breakout but behaves like a trap — the move "fails" because its real purpose was to grab liquidity, not to continue. Spotting the sweep is what keeps you from buying the high or selling the low.
The cleanest setups often pair a sweep of one side with a clear reaction toward the other side, where the next pool of liquidity is resting.
How to map BSL & SSL before the session
Before you look for any trade, mark where liquidity sits:
- Previous day high & low (PDH / PDL) — obvious reference liquidity.
- Weekly highs & lows — higher-timeframe pools.
- Session highs & lows — Asia, London and New York each leave levels.
- Equal highs / equal lows — clustered stops that act as magnets.
With this map in place, the next step is building a directional read and using execution tools like Fair Value Gaps and IFVGs — and timing it with the right session.