In practice
Stops from long positions and entry orders from breakdown sellers both sit below lows, and both are sell orders. A large trader who wants to buy needs sellers, so these clusters are where big buy orders can be filled.
Traders mark the obvious lows (the previous day's low, the week's low, equal lows) and treat them either as targets for short trades or as places to watch for a sweep and reversal.
What to watch for
Price reaching sell-side liquidity is not a buy signal by itself. In a real downtrend the lows break and price keeps falling; the reaction after the level is taken decides which it was.
Related terms
3 terms- Buy-side liquidityBSLBuy orders resting above highs: short sellers' stop-losses and breakout traders' buy 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.