Liquidity zones are areas on the chart where large volume orders cluster. In Smart Money Concepts, these zones often sit just beyond order blocks because traders naturally place their stops and breakout entries there. Knowing where they exist helps in identifying liquidity sweeps.
There are two types of Liquidity zones: Buy Side Liquidity Zones above resistance Order blocks, where buy stops, short stop losses, and short liquidations gather.
Sell Side Liquidity Zones below support Order blocks, where sell stops, long stop losses, and long liquidations accumulate.
When price taps into these areas which are high Liquidity Zones, it triggers these resting orders, opens breakout entries, and forces liquidations. This burst of volume lets institutions execute large orders and often turns a move that looks like a breakout into a liquidity sweep.
Just one pro tip before you move on…
Liquidity zones aren’t just limited to Order blocks. They are often built at levels that are obvious, widely watched, and ideal for the Smart Money Concept Traders to exploit.
Liquidity Zones are found at a Swing high and swing low.
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