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Buy-Side and Sell-Side Liquidity in ICT Trading: A Strategic Approach

July 29, 2023

What is buy-side and sell-side liquidity?

Liquidity holds a paramount position in the ICT trading methodology, which can be bifurcated into buy-side and sell-side liquidity. The former is indicative of a point on the trading chart where short sellers typically place their stop orders. Conversely, sell-side liquidity highlights a point on the chart where long-position traders usually set their stop orders. These levels are frequently located near the upper and lower boundaries of trading ranges - areas where traders may acknowledge their misjudgments and wish to exit their trades.

Such levels are intelligently leveraged by the 'smart money' participants, who strategically accumulate or dispense positions near areas populated with stop orders. This strategy is fueled by the high concentration of stop orders at key levels, facilitating larger traders to optimally implement their positions. Once a level teeming with stop orders is breached, the price often reverses its course, moving in the opposite direction in pursuit of liquidity at the other extreme.

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