Liquidity Sweep: What It Is and How to Trade It
What a liquidity sweep is, how it differs from a breakout, how to spot one at the previous day high or low, the usual entry plan, and how to test it honestly.
A liquidity sweep is when price trades through an obvious high or low and then closes back inside. The level was obvious, so stop orders and breakout orders sat just past it. When those orders fill, the buying or selling can run out, and price may turn. Traders use the pattern to fade the move, with a stop just beyond its extreme.
What it looks like
Take the previous day's high. Many traders are short with stops above it, and others plan to buy a break. Price trades 10 points through it, those orders fill, and no new buyers come in. The candle closes back below the high, and that is the sweep.
| Sweep | Breakout | |
|---|---|---|
| Goes through the level | Yes | Yes |
| Candle closes back inside | Yes | No |
| Common plan | Trade back toward the range | Trade with the break |
A sweep is a kind of false breakout, and you can't tell them apart until the candle has closed.
Which levels to watch
- The previous day's high and low
- The Asia session's high and low, during the London and New York kill zones
- The opening range, the first 5 to 30 minutes of the session
- Equal highs or lows, where several touches sit at about the same price
A common plan
- Mark the levels before the session starts, so you aren't choosing them after the fact.
- Wait for price to trade through one and close back inside.
- Enter on that close, or on a pullback into a fair value gap left by the move away.
- Put the stop beyond the sweep's extreme, with a little room. See stop loss types.
- Target the middle of the range or the opposite side, and check the reward against the risk.
Where it goes wrong
- Fading every move through a level. On a strong trend day each sweep can be just a pause, so the same setup loses again and again.
- Entering before the close. Until the candle closes, it may simply be a breakout.
- Judging it on past charts. On a finished chart a sweep is easy to spot, so test it with the right side of the chart hidden.
How to test it
Count every time the pattern appears, not only the ones you noticed. Then compare with what you would get from entering at random, because a fade can look good just from a high win rate with small targets.
ChartTrainer's Liquidity sweeps indicator draws the previous day and Asia highs and lows and marks each candle that trades through one and closes back inside. You can replay a random day candle by candle in the ICT simulator and decide at each sweep whether to take it. Practice results don't promise real results.
Questions
- What is a liquidity sweep?
- Price trades just past an obvious high or low, where many stop orders sit, then closes back inside. The move through the level is the sweep.
- What is the difference between a sweep and a breakout?
- A breakout closes beyond the level and keeps going. A sweep goes through it and closes back inside. You usually can't tell which one it is until the candle closes.
- Is a liquidity sweep the same as a stop hunt?
- It is the same chart pattern. Stop hunt implies someone did it on purpose, which you can't see. Liquidity sweep just describes what price did, so it is the safer way to think about it.
- Where do liquidity sweeps happen?
- Around levels many traders can see: the previous day high and low, the Asia session high and low, the opening range, and equal highs or lows on the chart.
- Do liquidity sweeps always reverse?
- No. Many sweeps pause and then continue through the level. That is why the stop goes beyond the sweep's extreme and why you need to count how often the reversal really happens.