Lesson 1 gave you the vocabulary to label market structure. This lesson answers the question structure alone can't: why does price break in one direction, reverse hard, and only then start the real move? The answer SMC/ICT gives is liquidity — and a real stop-hunt-and-reverse trade is the clearest way to see it in action.
Buy-Side and Sell-Side Liquidity — Where the Stops Actually Sit
Every trader who buys a breakout or shorts a breakdown places a stop-loss somewhere. Zoom out across thousands of traders and those stops cluster at predictable places — mainly just beyond the obvious swing highs and lows on the chart.
| Term | Where it sits |
|---|---|
| Buy-side Liquidity (BSL) | Above swing highs — shorts' stop-losses, breakout buyers' entries |
| Sell-side Liquidity (SSL) | Below swing lows — longs' stop-losses, breakdown sellers' entries |
| Liquidity Pool | A cluster of stops at one specific level — often a visible swing point or equal highs/lows (EQH/EQL) |
| Equal Highs / Equal Lows (EQH/EQL) | Two or more swing points at nearly the same price — a bigger, more obvious pool |
A liquidity sweep (also called a stop hunt or liquidity grab) is the event where price pushes through one of these pools, triggers the resting stops, and then reverses. Inducement (IDM) is the SMC/ICT term for a smaller, earlier pool set up specifically to trap traders before the real move — a sweep of inducement often precedes a sweep of the real target.
Trade Walkthrough: Trading a Sell-Side Liquidity Sweep
Sell-Side Liquidity Sweep and Reversal (Illustrative Example)
- The pool forms — a swing low at 49.3 (touched twice, May 30–June 5) becomes an obvious sell-side liquidity target. Every short below it and every long's stop sits just under this level.
- The sweep — June 8 pushes to 48.9, clears the pool, triggers the resting stops, then closes back at 49.0 — already showing rejection.
- Confirmation — June 9 holds above the sweep low and closes at 49.1, the first sign the sweep was a trap, not the start of a breakdown.
- Entry — on the June 9 close, stop below the sweep wick (48.85), targeting the liquidity pool that now sits above — the prior highs near 50.1–50.6.
Our liquidity sweep and stop hunt article walks through the same event from a pure price-action angle, without any SMC/ICT vocabulary — useful if you want to see the same idea stripped down to its simplest form.
Liquidity Void, Old Levels, and the Draw on Liquidity
Three more terms round out how SMC/ICT content describes where price is headed, not just where it's been:
- Liquidity Void — a stretch of chart with thin, fast candles and little trading activity. Price is expected to move through a void quickly in either direction, since there's little resting order flow to slow it down.
- Old High / Old Low — any prior significant swing point that hasn't been swept yet. Age doesn't matter — an old high from three weeks ago is still a standing target until price actually reaches and clears it.
- Draw on Liquidity (DOL) — the single unifying idea: at any moment, there is a specific level SMC/ICT teaching says price is "being drawn toward." Reading the DOL correctly is really just combining everything above — which pool is largest, which is closest, and which side of structure price is currently on.
Does every liquidity sweep lead to a reversal?
No — and this is the most commonly overstated claim in SMC/ICT content. A sweep with a strong confirmation close and a structure shift behind it is a much stronger signal than a sweep alone. Plenty of sweeps are simply the market continuing in the same direction after clearing out one pool on the way. Treat "sweep" as "stops were triggered here," not "reversal guaranteed."
How is Session High/Low different from a regular swing high/low?
Session High/Low is scoped to a specific trading window — the Asian session, the London session, the NY session — rather than the whole visible chart. It's a smaller-scale liquidity reference used mainly in the killzone-timed setups covered in Lesson 8, where the relevant pool is often "today's session low," not last month's swing low.