There is no existing record of when the castle was first built. It is first mentioned nearly twenty years after King John's death when, at the beginning of 1235, William de Ferrars, Earl of Derby [then Lord of the town and district] received Henry III's permission to make a levy upon his tenants so that he could 'make strong' his castle of Liverpool.

The castle had a protective ditch or moat which roughly followed a line of what was later Derby Square to the north, Redcross Street to South Castle Street to the south, St George's Crescent to the east, and Preeson's Row to the west. [The Queen Victoria Memorial now stands almost in the centre of the land formerly occupied by the castle.]
The main entrance faced towards Harrington Street. On its eastern side was the castle orchard through which a footpath [later Lord Street] led to the ferry over the Pool [near the later junction of Lord Street and Church Street]. 
In 1704, when the castle was in a very dilapidated state, powers were obtained to demolish it altogether. This was mainly carried out between 1709 and 1720, the last piece of the outer wall disappearing in 1725. 

Image details: EW Cox