ICT Liquidity Void is receiving much attention in the trading realm, particularly in ICT. What is it? And why should traders be concerned about it? If you pay attention to price action, market structure, and institutional order flow, you will know that knowledge of liquidity voids can give you an edge in trading.
This blog will explain everything from defining what an ICT liquidity void is to, different types of liquidity voids, how they affect price action, how to spot them on your chart, and most importantly, how to trade them effectively.
Understanding ICT Liquidity Void
ICT (Inner Circle Trader) are concept, developed by Michael J. Huddleston, and is based on smart money trading concepts. The Liquidity Void refers to areas on a price chart where there is little or no trading activity. These zones typically manifest after an aggressive price movement, either i n one direction or the other, leaving a ‘gap’ or ‘imbalance.’
Such liquidity voids most often depict an absence of sell and buy orders at that price range. Institutional or smart money is often the one creating these voids when executing huge orders, usually at a price, thus displacing the market violently.
Types of ICT Liquidity Voids
The two kinds of liquidity voids are those primarily observed by traders:
Bullish Liquidity Void
Bearish Liquidity Void
1. Bullish Liquidity Void
When sharp upward price movements are followed by a void in between and a subsequent drop to near those two price levels, then an aggressive buying activity, usually by the institutional players, has entered the market.
Characteristics:
- Usually after a breakout or news-driven move
- Price could move back to the void to fill the imbalance
- Indicates strong upward momentum
2. Bearish Liquidity Void
This is the opposite of the bullish one; when the price drops sharply, an upward price gap or imbalance zone is created.
Characteristics:
- The price will be found where a large sell-off has just occurred.
- A stop-loss hunt or Effects of Liquidity Void on Price Movement
How Liquidity Voids Impact Price Movement
Liquidity voids are extremely important for price action trading. Here is their impact on the market:
- Liquidity voids are price magnets. Whenever the market creates a void, it also provides a relatively higher probability of returning into that void thus creating an opportunity for us to predict the price movement.
- A void is often considered a key level of support or resistance depending upon their bullish or bearish classification.
- The voids are the very areas where the market is inefficient and thus provide scope for traders to exploit this inefficiency in expectation of a price correction.
How to Identify ICT Liquidity Voids on Charts
The actual identifying of liquidity voids requires a certain technique while observing the price action and understanding market structure. The following steps are useful:
Step 1: Use a Clean Price Action Chart
Use a Clean Price Action Chart Ridding off the Indicators. You are left with a Candlestick or Price Bar.
Step 2: Look for Large Candles
Identify the Large Candles. Large bullish or bearish candles with a minimum wick are those that typically signal a liquidity void.
Step 3: Mark the Candle Range
Mark the lost zone with the high and low of the impulsive candle.
Step 4: Confirm With Volume (Optional)
The void zone will further confirm that little trading activity is within the range missing out on a lower volume.
The tools to help:
TradingView or MT4
ICT Fair Value Gap indicators (available in custom libraries)
“Liquidity voids generally belong to the Fair Value Gap (FVG) concept in ICT, concerning a three-candle pattern as the void is the gap between the wicks of the first and third candle.”
How to Trade ICT Liquidity Voids Effectively
After identifying a liquidity void, here are some ICT-affiliated ways to trade for profits:
Enter trades upon price returns to the void: Enter long around support in the case of bullish voids, and enter short at resistance in the case of bearish voids.
Combine with confirmation signals: Use some other technical indicator like RSI, MACD, or candlestick patterns to confirm entries in line with liquidity voids.
Put stop-losses: Place stop-loss orders below the void for long trades and above the void for short trades to manage risk.
Take profits at key levels: Exit the trades when the price reaches the far end of the void or predefined profit targets.
Myths & Misconceptions About Liquidity Voids
Take away some common myths:
❌ Myth 1: All Voids Must Be Filled.
Not true. While many voids are filled, some resist being filled, especially during strong trends. Never assume that price has to come back.
❌ Myth 2: Voids Are Gaps.
They may appear the same but are conceptually different. Liquidity voids pertain to the institutional order flow while gaps are often seen as retail market inefficiency (especially in stocks or indices).
❌ Myth 3: The Liquidity Void Is Just For Pro Traders.
With good chart reading and practice, liquidity voids can be understood and traded even by beginners.
Conclusion
ICT Liquidity Voids are trader’s best tools that help them know the market behavior in potential trading opportunities. Traders can learn about the different types of voids, their effects on price movements, and the best way to trade them, to improve or augment their techniques in trading successfully.
Trading liquidity voids demands learning patience and discipline, alongside an in-depth understanding of the market dynamics. One has to couple this concept with all other forms of technical analysis tools and risk management practices for maximum trading potential.
FAQs
Is the liquidity void the same as a fair value gap?
Not really, but closely related. A fair value gap (FVG) comes most times as a consequence of an underlying liquidity void, especially in ICT trading.
Can I use indicators to detect liquidity voids?
Some custom indicators try to help, but the best method is manual reading on the chart based on price action.
Do all liquidity voids get filled eventually?
Not all. While many do get filled, some remain unfilled—particularly during strong trends or when economic news is released.
Are liquidity voids reliable for scalping?
Absolutely! Liquidity voids can be used for intraday and scalping strategies as long as they are confirmed with appropriate confirmations.
Which timeframe is best for detecting liquidity voids in ICT?
The 1H and 4H and daily timeframes are the most reliable, although even 15M charts will occasionally show valid voids for intraday trading.
