While Order Blocks focus on where institutions entered, Liquidity Sweeps focus on where they manipulate price to find liquidity. Markets gravitate toward “Liquidity Pools”—areas with piles of Stop Loss orders (usually above double tops or below double bottoms). Institutions push price through these levels to trigger retail stops (creating liquidity) before reversing price in the true intended direction. This is often called a “Stop Hunt.”
Pros:
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Sniper Entries: You enter exactly when others are getting stopped out, often catching the absolute wick of the move.
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Fast Reversals: These trades tend to move into profit immediately after the sweep.
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Psychological Edge: You are trading with the “House” against the retail herd.
Cons:
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High Risk: You are effectively “catching a falling knife.” If the momentum is too strong, it’s not a sweep; it’s a breakout, and you will be run over.
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Requires Screen Time: These moves happen fast and often require live monitoring.
How to Use It:
You are looking for a “Fakeout” setup.
Step 1: Identify Liquidity. Look for “Equal Highs” (Resistance) or “Equal Lows” (Support) on a 15-minute or 1-hour chart. These look like perfect double tops/bottoms. Retail traders are taught to put stop losses just behind these lines.
Step 2: The Sweep. Wait for price to aggressively pierce through this level. Do not trade yet. Many traders will see this as a “breakout” and jump in.
Step 3: The Confirmation. Watch the candle that broke the level. You want to see it reject quickly and close back inside the original range, leaving a long wick behind. This wick proves that price probed the level for liquidity but found no acceptance.
Step 4: Entry. Enter immediately on the close of that rejection candle (or place a limit order at the open of the next candle).
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Stop Loss: Just beyond the wick of the sweep candle.
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Target: The opposing liquidity pool (the Equal Lows if you shorted the Highs).
