Buy-side / sell-side liquidity

Why the names point that way

The names describe the orders, not the traders. A trader who is short exits by buying, so their stop loss is a buy order sitting above price. A breakout trader waiting to buy above a high uses a buy-stop entry in the same place. Together they make buy-side liquidity. Below price, buyers' stop losses and breakout sellers' entries are all sell orders: sell-side liquidity.

The general idea, and the second meaning of the word that market liquidity is not, is on the liquidity page. This page is about naming the two pools and using them.

How to mark BSL and SSL on a chart

Start from the current price and mark the obvious levels each way:

• Old swing highs and lows that price hasn't traded back through since. Use confirmed swing points, not every bump.
• Equal highs and equal lows, where stops from several entries stack behind one flat edge.
• The previous day's and week's high and low, which most traders can see on any chart.
• The edges of a range, and round numbers near them.

Levels price has already traded through are spent: the stops there have been filled. Mark them differently, or remove them, so the map shows only pools that are still there.

A worked example

A 1-hour gold (XAU/USD) chart with price at 4,020.00. The prices are an illustration, not real data.

• The map: buy-side liquidity at 4,045.00 (yesterday's high) and 4,062.00 (two equal highs from earlier in the week). Sell-side liquidity at 4,003.00 (the last swing low) and 3,990.00 (the previous day's low).
• The trade idea: the trend is up, so the draw is buy-side. A buy at 4,020.00 with the stop at 3,996.00, below the swing low and its stops, risks $24.00 an ounce.
• Which pool to target: the first BSL pool, 4,045.00, is $25.00 away: a 1:1.04 risk-to-reward. The equal highs at 4,062.00 are $42.00 away: 1:1.75. The map shows the nearer target barely pays for the risk.
• The size: one standard lot is 100 ounces, so a $24.00 stop costs $2,400 per lot. Risking $50 gives 0.02 lots (risk $48); at 4,062.00 the gain would be $84.

The risk reward calculator and lot size calculator do this arithmetic for gold and forex pairs.

Why it matters

A map of buy-side and sell-side liquidity answers two questions before a trade: where is price likely to travel (the nearest untouched pool in the trend's direction), and where are the stops that a sweep would take (including, possibly, yours). It turns a target from a guess into a level you can point at.

Common mistakes

• Mixing up the sides. Buy-side is above price, sell-side below, whoever placed the orders. Read the order, not the trader.
• Setting the target just past the pool. Price often reaches a pool, fills the orders and turns. A target a little before the level is more likely to be filled than one beyond it.
• Keeping spent levels on the map. A high that has already been swept has less pull. Look for the next untouched one.
• Putting your stop inside the opposite pool. A buyer's stop just under the obvious low is part of the sell-side liquidity a sweep would take. Give it room and size down.

Questions

Liquidity targets in the app

StraviFX's hourly Swing signals check (Premium, monthly plans and longer) takes the highest high and the lowest low of the last 80 four-hour candles as the buy-side and sell-side targets. For a buy idea it aims at that high if it is above price; if there isn't one, it sets the target at twice the risk instead. Sell ideas use the low the same way. These are rules for reading a chart, not predictions; the decision stays with you.

Related terms

• Market structure: The sequence of swing highs and lows a market prints: rising is bullish, falling is bearish, neither is a range.
• Break of Structure (BOS): A candle close beyond the last swing high or low in the direction of the trend. It signals continuation.
• Change of Character (CHoCH): The first break against the trend: an uptrend closing below its last higher low, or a downtrend above its last lower high.
• Market Structure Shift (MSS): The confirmed flip that can follow a CHoCH: a failed swing in the old direction, then a close beyond the next swing.
• Swing high / swing low: A candle whose high is above its neighbours, or whose low is below them. The pivots every structure reading is measured from.
• Higher highs / higher lows: The four swing labels (HH, HL, LH, LL) and what each combination says: uptrend, downtrend or range.
• Range / consolidation: Price moving between a ceiling and a floor with no new highs or lows beyond them. A reason to wait, or to trade the edges.
• Retest: Price coming back to a level it has just closed beyond, to see whether the level now holds from the other side.
• Liquidity: Resting orders, mostly stop losses, that pool just beyond obvious highs, lows and round numbers. Price is often drawn toward them.
• Liquidity sweep / stop hunt: A push past an obvious high or low that triggers the stops there, then closes back inside. A close beyond is a breakout.
• Equal highs / equal lows: Two or more highs or lows at nearly the same price. A flat edge that collects stops, so a common sweep target.
• Order block (OB): The last opposing candle before a strong move away. A zone price may return to, with the stop just beyond it.
• Fair Value Gap (FVG): A three-candle gap where candle 1's high and candle 3's low don't overlap. Traded through fast, so often revisited.
• Breaker block: A failed order block that price closes through, then returns to from the other side, where it can act the opposite way.
• Mitigation block: A failed order block after a swing that fell short. Price breaks it, then returns from the other side as trapped traders exit.
• Supply / demand zone: The base a sharp move left from: demand below price, supply above. The first return to a fresh zone usually counts most.
• Premium / discount: A range split at its 50% midpoint, equilibrium. Buy in the discount half, sell in the premium half.
• Optimal Trade Entry (OTE): The 62–79% pullback of the last impulse leg. A deep entry that keeps the stop close and the target far.
• Entry: The price a trade opens at: market, limit or stop. With the stop and target fixed, it sets the risk and the reward.
• Stop loss: An order that closes the trade at a set price to cap the loss. It goes where the idea is proven wrong, plus a buffer.

See every term in the trading glossary.