Liquidity — Trading Glossary

On a chart, the pool of stop losses and pending orders resting just beyond obvious swing highs and lows — the orders price is often drawn to.

A stop loss on a long trade is a sell order, so a cluster of them below a low is a block of selling a large buyer can fill against. That is why price so often dips just past an obvious low before turning.

In wider finance, "liquidity" also means how easily an asset can be bought or sold without moving its price. On a price chart, traders almost always mean the resting orders.

Also called: equal highs, equal lows, buy-side liquidity, sell-side liquidity.

Taught in

Liquidity: Why Price Takes Your Stop FirstStrategy Playbook

Where stop losses pile up, why price is drawn to them, and how to tell a sweep that reverses from a breakdown that keeps going.

Also covered in that lesson

Liquidity sweepPrice trading just beyond an obvious high or low to trigger the stops there, then closing back inside — a wick through the level, not a close.InducementA minor high or low inside a pullback that tempts traders in early and is usually taken out on the way to the main liquidity pool.