Liquidity
If you can see where the stops are, you can see where the market is going.
Liquidity
Where the stops are. Where the market goes.
Liquidity
Also known as: Stops, Stop pools, Resting orders
Pools of pending orders sitting at obvious levels — equal highs/lows, swing extremes, round numbers, prior session H/L. Larger participants need these orders to fill their size, so price is drawn to liquidity before reversing or continuing.
Retail traders place stops in obvious places: above recent highs, below recent lows, on round numbers. Big players need volume to fill orders. So price visits those obvious places, hits the stops, and then often goes the other way. That's why your stop-loss feels personally targeted. It's not personal — it's just where the volume is.
| Buy-side liquidity | Sell-side liquidity | |
|---|---|---|
| Where | Above swing highs / equal highs | Below swing lows / equal lows |
| Stops | Short stops resting | Long stops resting |
| When tapped | Shorts get stopped out → can fuel reversals down | Longs get stopped out → can fuel reversals up |
| Visual cue | Multiple wicks at the same high | Multiple wicks at the same low |
Sweep + reversal
Move runs to opposing liquidity (highs above).
Watch a sweep develop bar by bar. Two equal lows form a stop pool → wick clears them → strong bullish candle reclaims the level → continuation to opposing liquidity.
Setup: Price has equal lows at 1.2630 from the prior session. London opens, price drives down through 1.2630 by 8 pips, sweeps the resting longs' stops, then prints a strong bullish candle.
We don't enter on the sweep — we wait for an LTF MSS (market structure shift) above the most recent LH. Once that prints, we look for an FVG or order block to enter long.
Outcome: MSS triggered, FVG entry filled, ran 2.5R into the prior session high.
Sweep + reversal entry
- Identifiable liquidity pool (equal highs/lows or session extreme)must
- Sweep clears the level by ≥ spread + a few pipsmust
- LTF MSS in the opposite directionmust
- Entry on FVG, OB, or wick rejection inside the LTF range
- Stop above/below the sweep extrememust
Mistake: Treating every wick as a sweep that must reverse.
Why it hurts: Some sweeps are continuations, not reversals. If price clears liquidity and the next candle keeps going in the same direction, that's a failed sweep — and it's bullish for the breakout.
Fix: Always wait for an LTF structural shift before assuming a reversal. No shift = no reversal trade.
- Liquidity = stops resting at obvious levels (equal H/L, swing extremes, session H/L).
- Price is drawn to liquidity before reversing or continuing.
- A sweep alone isn't a trade — it's an alert.
- Trade only when sweep + LTF MSS line up.
- A failed sweep that continues is also useful — it signals breakout strength.