Liquidity the ICT way
Lesson 04 · 6 min read · By DT Terminal
Where buy-side and sell-side liquidity rest, a written test for a liquidity sweep versus a run, the draw on liquidity, and the rotation between external and internal liquidity.
Unlock the full lesson in the app
Worked examples, the quiz and the interactive tools are in the app. Free account.
BSL and SSL are named by the order
You met resting orders in Day 13. ICT gives the two pools fixed names:
- Buy-side liquidity (BSL) rests above highs: short sellers' buy stops and breakout traders' buy-stop entries.
- Sell-side liquidity (SSL) rests below lows: buyers' sell stops and breakout traders' sell-stop entries.
The name is the order type, not who benefits. A stop above a high closes a short, and closing a short means buying.
Go deeper
This is the best evidenced idea in the course. Research at the Federal Reserve Bank of New York (Osler) found that FX stop orders cluster at round numbers and just beyond them, and that triggered stops can feed fast moves. What price does after the stops fill is not shown by that work.
Where the pools rest
ICT ranks pools by how obvious they are. The more traders can see a level, the more orders are assumed to sit beyond it.
| Pool | What it is |
|---|---|
| Relative equal highs and lows | Two or more highs or lows at nearly the same price. ICT calls them engineered liquidity, because they look like strong resistance or support |
| PDH and PDL | The previous day's high and low |
| PWH and PWL | The previous week's high and low |
| Session highs and lows | The Asian range high and low, the London high and low |
| Monthly highs and lows | The same idea on the monthly chart |
Swing size matters too. Using the swing points from Market structure the ICT way, a long-term high is assumed to hold more liquidity than a short-term one.
Liquidity sweep or run: a written test
When price reaches a pool, ICT reads two outcomes. A liquidity sweep trades through the level and comes back inside: a reversal clue. A run trades through and keeps going: a breakout. One written test:
- Liquidity sweep: a wick beyond the level, with the same candle's body closing back inside, on the timeframe you trade.
- Run: a body closes beyond the level and the next candle also closes beyond it.
Liquidity
Liquidity sweep or run, on both sides
- The old high or low
Buy-side liquidity
above the previous day high
Sell-side liquidity
below the previous day low
Liquidity sweep
a wick beyond, the body closes back inside on the same candle
Run
a close beyond, and the next candle closes beyond too
No study shows that liquidity sweeps predict reversals better than chance.
Write the test down as a rule
Go deeper
A liquidity sweep fills the orders beyond the level before it comes back. Fading a run because liquidity was taken is the common way this goes wrong. Writing the test into your rules means every trade you call a liquidity sweep has to pass the same check, and you can see later whether it did.
The draw on liquidity
The draw on liquidity is the pool you judge price more likely to reach next, chosen from the higher timeframe. Name the draw first, then look for entries toward it.
Worked example
Example 01: EURUSD M15: a liquidity sweep of the PDL, and the draw above
The worked example, with every number walked through, is in the app.
Go deeper
Skipping the draw and trading every liquidity sweep on a one minute chart is a common mistake. The chart stops where the decision is made.
The Asian session leaves relative equal highs at 1.0871 and 1.0872. The liquidity sweep trades to 1.0816, in the London morning, and the body closes at 1.0826. Had the sweep candle closed below the PDL and the next one too, it would be a run, and the draw would be lower, such as the previous week's low.
Times are New York time: EDT, UTC minus 4, from 8 March to 1 November 2026, and EST, UTC minus 5, otherwise.
From external to internal, and back
External range liquidity (ERL) sits beyond a range's high and low. Internal range liquidity (IRL) sits inside it, mainly in unfilled fair value gaps.
ICT adds a rotation: after price takes ERL it tends to draw back to IRL, and after IRL it tends to head for the opposite ERL. Even sympathetic sources call this a framing device, not a law.
Worked example
Example 02: NAS100 H1: ERL taken, then IRL
The worked example, with every number walked through, is in the app.
Rotation
The next day: two outcomes the model allows
- Internal range liquidity (FVG)
- External range liquidity
- Gap midpoint
Higher timeframe bias up
the next draw is the buy-side above the liquidity sweep
Higher timeframe bias down
the next draw is the sell-side below the range
After the gap is reached
the same chart, two possible next legs
Go deeper
The Intensive defined both. Besides unfilled fair value gaps, IRL includes order blocks and minor equal highs or lows.
Inducement, an SMC term
Inducement is a small, obvious high or low inside a pullback that traps early entries before price reaches the zone a trader wants, often an order block. The term comes mainly from the Smart Money Concepts (SMC) community, not from ICT, whose nearest words are engineered liquidity and relative equal highs and lows.
Avoid intent language. "They hunted my stops" is a story. "A wick went beyond the level and closed back" is something you can count.
Tag every trade by its pool
Check yourself
Quick review · 0 of 0