Liquidity is simply the resting orders available for someone to trade against — stop losses, pending orders and breakout entries. SMC treats these clusters as targets, because large players need them to fill size. Understanding where liquidity sits is the key that unlocks most other concepts in this course.
Where liquidity rests
The most predictable pools sit at obvious price points. Stops from short sellers and breakout buy orders gather above swing highs, while stops from longs and breakout sell orders gather below swing lows. Equal highs and equal lows are especially strong liquidity magnets because so many orders line up at the same price.
Why price seeks it
The mechanism is a matching problem: a large buyer needs many sellers, and the easiest place to find them is where stop-sell orders cluster below a low. This is why price often runs a level, grabs the orders, and then reverses — the theme of the next few modules.
- Liquidity = resting orders (stops, pending orders, breakout entries).
- It pools above highs (buy-side) and below lows (sell-side).
- Equal highs and equal lows are the strongest magnets.
- Price often targets liquidity before making its real move.
Liquidity is where orders rest — above highs and below lows — and SMC treats those pools as price magnets.