Liquidity Pool
Areas where stop losses and pending orders cluster, creating tradable liquidity.
Full Definition
A liquidity pool is an area on the chart where a large concentration of stop-loss orders and pending orders accumulate. These typically form at obvious technical levels like swing highs, swing lows, round numbers, and well-known support/resistance zones. Smart money and institutional traders often target these pools to fill large orders, as they provide the necessary liquidity for substantial positions.
Example
EUR/USD has formed multiple equal highs at 1.1000. Retail traders place stop losses just above this level. This cluster of stops creates a liquidity pool that institutional traders may target before reversing price lower.
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