# Liquidity in Trading: Sweeps and Stop Hunts · DT Academy

> Where liquidity builds above old highs and below old lows, what a liquidity sweep looks like, and how it differs from a real break.

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Day 13Liquidity

Chapters done

# Liquidity

Day 13 of 26 · 10 min read · By DT Terminal

Liquidity is where orders are waiting: stop losses above old highs and below old lows, and pending orders at obvious levels. This lesson shows where those pools usually build up, what a sweep of one looks like, and how a sweep differs from a real break of structure.

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Chapter 1 of 6

## What liquidity means on a chart

On a chart, **liquidity** means orders already waiting at a price. Many are thought to be **stop losses**: buyers often stop below the nearest swing low, sellers above the nearest swing high. Breakout traders add orders at the same spots.

A long's stop is a sell order and a short's stop is a buy order, so the orders gather on predictable sides:

- **Buy-side liquidity (BSL)** rests above swing highs.
- **Sell-side liquidity (SSL)** rests below swing lows.

Stop clusters where the resting orders sit [Replay in the app](https://www.thedtterminal.com/login?signup=true&redirect=%2Fjournal%2Facademy%2Fliquidity%3Fsection%3Dwhat-liquidity-is%23what-liquidity-is)

| Pool | Where it rests | Orders waiting there | Filled when |
| --- | --- | --- | --- |
| Buy-side (BSL) | Above swing highs and equal highs | Shorts’ stop losses, breakout buy stops | Price trades up through the high |
| Sell-side (SSL) | Below swing lows and equal lows | Longs’ stop losses, breakout sell stops | Price trades down through the low |

A large order needs someone on the other side. That is one common explanation for price reaching for obvious highs and lows: **a model, not a fact**.

**Why price reaches for a pool**

A trader selling size can fill against the buy orders resting above a high, and a trader buying size can fill against the sell orders below a low. Nobody sees the whole market's orders, so this is a model that explains a lot of price action, not a fact about any one move.

Chapter 2 of 6

## Why equal highs and equal lows matter

Two or more swing highs at about the same price are **equal highs**; two or more such lows are **equal lows**. Many traders read them as a double top or bottom, or a clean range edge, and put stops just beyond. That makes them the clearest pools on a chart.

The pool sits **beyond the outermost one**: above the higher of equal highs, below the lower of equal lows.

| Swings | Prices | Apart | Read as |
| --- | --- | --- | --- |
| `GBPUSD` Asian lows | 1.33412 and 1.33408 | 0.4 pips | Equal lows, SSL below the lower |
| `BTCUSD` weekend highs | 108,850 and 108,880 | $30 | Equal highs, BSL above the higher |
| `EURUSD` M15 highs | 1.17250 and 1.17190 | 6.0 pips | Two separate highs, **not a pair** |

**The more obvious the level, the bigger the pool.** A level every trader can see is one many of them have put a stop behind.

**How equal is equal, and other obvious levels**

Equal rarely means equal to the last digit. On a forex pair on the lower timeframes, highs within a pip or two of each other are usually read as equal, and the tolerance grows with the timeframe and with how far the instrument moves in a day.

Other obvious levels collect stops for the same reason: the previous day's high and low, round numbers, and the high and low of a session, which [Day 5, Market sessions](https://www.thedtterminal.com/academy/market-sessions) covers. It is the common explanation for why price so often trades through the obvious high or low before it turns.

Chapter 3 of 6

## A sweep or a real break

At a pool, a candle does one of two things. In a **liquidity sweep** (also called a stop hunt or liquidity grab), a wick trades beyond the level, fills the stops, and the candle closes back inside. In a **real break**, a body closes beyond it.

The rule from [Day 10, Market structure](https://www.thedtterminal.com/academy/market-structure): **closes matter more than wicks**. Try each case:

Interactive tool

### Sweep or break

This interactive tool runs in the app, with your own numbers.

[Continue in the app, free](https://www.thedtterminal.com/login?signup=true&redirect=%2Fjournal%2Facademy%2Fliquidity%3Fsection%3Dsweep-or-break%23sweep-or-break) Free account

|  | Sweep | Real break |
| --- | --- | --- |
| Wick beyond the level | Yes | Usually |
| Body close | Back inside the level | Beyond the level |
| Stops beyond | Filled | Filled |
| What it often leads to | A move back the other way, **confirmed only by a shift** | Continuation, with the old level often acting as support or resistance |

Liquidity

### What price does at a pool

- The pool
- Bearish shift
- Bullish shift

Buy-side liquidity

above swing highs and equal highs

Sell-side liquidity

below swing lows and equal lows

Resting

equal highs, stops waiting beyond

Sweep

a wick beyond, the close back inside

Sweep, then shift

a body closes beyond the swing that launched it

Real break

a body closes beyond the level

**Watch the close, then the next swing.** A sweep and a break both fill the stops. Only the close says which one it was, and only a shift after a sweep turns it into the sequence in section 5.

Schematic candles, not market data. The gold dots are the equal highs or lows; the pool rests beyond the outermost one.

Sweep or break two questions, in order

The second question is about the swing that launched the sweep: a body close beyond it is the shift. Until then **a sweep can still turn into a break**, as Example 01 shows.

Check your sweep trades in Analytics

Tag each trade at a pool: sweep with a shift, sweep without one, or break. Then compare each tag's win rate and average R.

**Example 01: a sweep that turned out to be a break**

Worked example

### Example 01: A sweep that turned out to be a real break

The worked example, with every number walked through, is in the app.

[Continue in the app, free](https://www.thedtterminal.com/login?signup=true&redirect=%2Fjournal%2Facademy%2Fliquidity%3Fsection%3Dsweep-or-break%23sweep-or-break) Free account

After a few dozen trades, Analytics filters by tag, so you can read each kind of trade on its own, and its Time tab shows the hours of the day they worked in.

Chapter 4 of 6

## Internal and external range liquidity

Zoom out to a range: the swing low and swing high that bound the current leg. **External range liquidity** rests outside it, above the range high and below the range low. **Internal range liquidity** sits inside: the minor highs and lows pullbacks leave, and imbalances such as the fair value gaps in [Day 12, Fair value gaps](https://www.thedtterminal.com/academy/fair-value-gaps).

Internal and external one range, two kinds of pool [Replay in the app](https://www.thedtterminal.com/login?signup=true&redirect=%2Fjournal%2Facademy%2Fliquidity%3Fsection%3Dinternal-and-external%23internal-and-external)

A common description: after price takes an external pool, it often **comes back inside** to a gap or minor swing, then reaches for the next external pool.

| Type | Where | Examples | Why traders watch it |
| --- | --- | --- | --- |
| External | Beyond the range high and low | The swing high and low, equal highs or lows at the edges | A sweep here can end a leg; a break here extends the trend |
| Internal | Inside the range | Minor pullback highs and lows, fair value gaps | Where a pullback often reaches before the next leg |

**Go deeper**

When a pullback runs a minor low inside the range, that is internal sell-side liquidity being taken, which on its own says little about the bigger trend.

Chapter 5 of 6

## The sweep and shift sequence

**A sweep on its own reverses nothing.** The sequence needs a **market structure shift (MSS)** next: in an uptrend, a body close below the last higher low, the low that launched the sweep.

Sweep, then MSS equal highs swept, last higher low broken [Replay in the app](https://www.thedtterminal.com/login?signup=true&redirect=%2Fjournal%2Facademy%2Fliquidity%3Fsection%3Dsweep-then-shift%23sweep-then-shift)

Sweep, then MSS mirrored: equal lows swept, last lower high broken [Replay in the app](https://www.thedtterminal.com/login?signup=true&redirect=%2Fjournal%2Facademy%2Fliquidity%3Fsection%3Dsweep-then-shift%23sweep-then-shift)

1. A clear pool forms: equal highs above an uptrend, or equal lows below a downtrend.
2. A wick takes it and the candle closes back inside. That is the sweep.
3. A body closes beyond the swing that launched the sweep. That is the shift.
4. The new direction is confirmed only by the first lower high and lower low, or higher low and higher high.

**The sweep is the setup. The shift is the evidence.** Without the shift, **a sweep is just a wick**.

DT Terminal Charts BTCUSD · H1 Sweep, then shift

Sample candles built around Example 03's prices, not a record of a real weekend. The gold line is the higher of the equal highs; the red line is the last higher low.

**The chart, price by price**

On the usual reading, the traders who bought the breakout above the highs are now caught on the wrong side, their stops sit below, and the structure has broken against the trend. Plenty of sweeps are followed by a break in the original direction instead, as Example 01 showed. **Always name the timeframe** too: a sweep and shift on M5 can be an ordinary pullback on H4.

The chart is the `BTCUSD` H1 weekend range from Example 03: two highs at 108,850 and 108,880, a Monday candle that wicks to 109,140 and closes at 108,720, back under both, and a later body that closes at 108,180, below the last higher low at 108,310. In the backtester, a Horizontal ray from each high keeps the pool on the chart as you play forward, so you see the sweep the moment it prints.

Chapter 6 of 6

## The sequence on a real setup

Worked example

### Example 02: Equal lows on GBPUSD, swept before London

The worked example, with every number walked through, is in the app.

[Continue in the app, free](https://www.thedtterminal.com/login?signup=true&redirect=%2Fjournal%2Facademy%2Fliquidity%3Fsection%3Dsweep-shift-example%23sweep-shift-example) Free account

Replay sweeps in the backtester

Replay a few weeks of `GBPUSD` M15. Mark equal highs and lows before price reaches them, then note sweep or break, and whether a shift followed.

**The detail, and a second example on BTCUSD**

The two lows are 0.4 pips apart, so sell-side liquidity rests below 1.33408, the lower of the two. Price had been falling through the session, and its last lower high is 1.33520. The sweep candle printed fifteen minutes before the London open. It took the sell stops below the equal lows, and the close above 1.33520 at 08:30 is a bullish shift: the full sequence.

Worked example

### Example 03: Buy-side liquidity on BTCUSD above a weekend range

The worked example, with every number walked through, is in the app.

[Continue in the app, free](https://www.thedtterminal.com/login?signup=true&redirect=%2Fjournal%2Facademy%2Fliquidity%3Fsection%3Dsweep-shift-example%23sweep-shift-example) Free account

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## Identifying fair value gaps

Day 12 · 9 min read

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Day 14 · 8 min read

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