What Is a Liquidity Sweep?

Dear Trader

Have you ever entered a trade at a level only to see the price hitting your stop loss and going in your direction afterward? I’m sure we all have experienced a similar loss in trading. This leads us to this video's topic, “liquidity sweep.”

A liquidity sweep occurs when institutional investors trigger stop losses above or below certain levels and create buying or selling pressure, then reverse the price direction immediately. While this can present trading opportunities, a thorough analysis is essential before making a trading decision.

As you can see, the price first takes the highs (Buyside Liquidity), triggers the stops of sellers, and then falls back after creating a liqyuidity sweep.

Here, the price takes out lows (Sellside liquidity), triggering stop losses of buyers, and then reverses immediately after creating a liquidity sweep.

Let me give you some examples of charts.

In this example, the price breaks above the range highs (BSL), creating a liquidity sweep and triggering stops of sellers. After that, it falls back immediately to the downside.

In this example, the price breaks below the support (Sellside liquidity), creating a liquidity sweep and triggering stops of buyers. After that, it rises higher immediately.

You can take advantage of liquidity sweeps by waiting for them to occur while the market is near a level. As soon as you see a liquidity sweep and the market returning, look for an FVG or OB to enter that direction.

Happy Trading!!!

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