In ICT Style, price is always moving toward liquidity. The concept of Draw On Liquidity (DOL) refers to situations where the price targets the existing liquidity in the market and utilizes it to continue its movement.
What is Draw On Liquidity?
Liquidity accumulates at key points such as old highs and lows, equal highs and lows, support and resistance zones, and order block areas. In ICT style, the Draw On Liquidity (DOL) concept refers to price movement toward these zones to absorb the liquidity needed for continuation.
Types of Liquidity in the Market
The forex market contains two primary types of liquidity, both playing a crucial role in analyzing the Draw On Liquidity (DOL) concept:
Buy-Side Liquidity
This type of liquidity is located above the current market price—an area where buy stop orders and stop losses of sell trades accumulate. These are often found near swing highs or key resistance levels.
Sell-Side Liquidity
Sell-side liquidity exists below the current market price—a region where sell stop orders and stop losses of buy trades are placed. These are typically found near swing lows or support areas.
Identifying Draw On Liquidity Movement
To detect Draw On Liquidity (DOL) moves, first identify high-liquidity zones using core ICT concepts that naturally attract price.
Old Highs and Lows
Old highs and lows are chart points where price previously reached and reversed. These levels are often prime targets for Draw On Liquidity (DOL) moves.
Equal Highs and Lows
Equal highs and lows are zones where price has repeatedly reacted at the same level. Retail traders often place stop losses behind these zones, creating ideal liquidity targets for Draw On Liquidity (DOL) moves.
Fair Value Gap (FVG)
A Fair Value Gap (FVG) is a price zone where an imbalance between buyers and sellers occurs. This causes a rapid movement in one direction, resulting in a gap between candles.
As a result, many orders remain unfilled. These gaps create ideal zones for Draw On Liquidity (DOL) moves.
Pros and Cons of Using Draw On Liquidity
While Draw On Liquidity (DOL) can optimize trade execution by identifying liquidity direction, it also poses challenges due to its dependency on liquidity presence and the need for deep order flow understanding.
Pros | Cons |
More precise entries | Requires advanced knowledge and experience in liquidity analysis |
Reduced slippage risk | Possibility of fake breakouts |
Higher accuracy in stop loss and take profit | Risk of early entry before liquidity grab confirmation |
Trading with liquidity flow | Difficulty in identifying main liquidity zones in lower timeframes |
Improved trade timing | High impact of news on liquidity |
Lower stop-hunt probability | Uncertainty in identifying valid liquidity levels |
Conclusion
In ICT style, Draw On Liquidity (DOL) moves refers to price being pulled toward high-liquidity zones. Identifying areas such as old highs and lows, equal highs and lows, and fair value gaps (FVG) is essential for analyzing DOL setups.
Although DOL strategies offer more accurate entries, they also carry challenges such as fake breakouts and the necessity of a deep understanding of order flow.
