Liquidity Sweeps
Overview
Liquidity sweeps (also called stop hunts or liquidity grabs) occur when price moves through an obvious support or resistance level to trigger stop losses and pending orders, then reverses. Institutions use these sweeps to fill large orders at better prices. Identifying potential liquidity pools (clusters of stops) is central to SMC trading.
Key Concepts
Buy-side liquidity: stop losses above swing highs, sell stops, and breakout orders. Sell-side liquidity: stop losses below swing lows, buy stops, and breakdown orders. Equal highs/lows are prime liquidity targets. Highs and lows of ranges, sessions, days, and weeks are key levels. 'Inducement' is engineered liquidity.
Entry Signals
Sweep of a key high/low followed by immediate reversal, Sweep of equal highs/lows with a sharp rejection candle, Sweep into an opposing order block or FVG, Volume spike on the sweep followed by reversal candle
Exit Signals
Enter after the sweep and rejection (ideally on LTF confirmation), Stop beyond the sweep's extreme wick, Target the opposite side of the range or next liquidity pool
Best Timeframes
Works on all timeframes; sweep identification on 1H/4H, entry on 5M/15M
Pro Tips
The concept of liquidity is the foundation of SMC. Before placing any trade, ask: where are the stop losses clustered? Where is the liquidity that institutions need to fill their orders?
More Topics in This Category
Kill Zones & Session Timing
Kill zones are specific time windows during the trading day when institutional activity peaks and the most significant moves occur. ICT identifies four main kill zones: Asian session (20:00–00:00 ET), London Open (02:00–05:00 ET), New York Open (07:00–10:00 ET), and London Close (10:00–12:00 ET). Trading only during kill zones improves probability.
Mitigation Blocks
Mitigation blocks are price levels where institutional traders return to 'mitigate' or close out prior losing positions before continuing in the new trend direction. When smart money takes a position that initially moves against them, they mark the level for re-entry — when price returns, they close the losing trade at break-even and add to their new directional position. This creates a powerful support or resistance zone.
Institutional Candles
Institutional candles (also called displacement candles or impulse candles) are large-bodied candles with little to no wicks that represent strong institutional activity. They break through structure and create FVGs. The characteristics of these candles — body size, wick ratio, volume — reveal where institutions are committing capital.
Premium & Discount Zones
Premium and Discount zones divide the current price range (from the swing low to swing high) into halves using the equilibrium (50%) level. Discount = below 50% (cheap, look to buy). Premium = above 50% (expensive, look to sell). This concept ensures traders are buying low and selling high relative to the current range.