In practice
Stops from short positions and entry orders from breakout buyers both sit above highs, and both are buy orders. A large trader who wants to sell needs buyers, so these clusters are where big sell orders can be filled.
Traders mark the obvious highs (the previous day's high, the week's high, equal highs) and treat them either as targets for long trades or as places to watch for a sweep and reversal.
What to watch for
Price reaching buy-side liquidity is not a sell signal by itself. Sometimes the highs break and the trend simply continues; the reaction after the level is taken decides which it was.
Related terms
3 terms- Sell-side liquiditySSLSell orders resting below lows: long traders' stop-losses and breakdown sell stops.
- LiquidityIn SMC, the pools of resting orders, especially stop-losses, that sit beyond obvious highs and lows.
- Equal highs and lowsTwo or more highs (or lows) at almost the same price: an obvious pool of stops that tends to get taken.