Liquidity Sweep (ICT / Smart Money)

What Is a Liquidity Sweep?

A Liquidity Sweep means:

The market first reaches and triggers traders’ Stop Losses and pending orders, and then moves in the actual direction.

Institutions need liquidity to execute large orders. Therefore, price often moves toward areas where many Stop Losses and orders are located.

Where Is Liquidity Found?

The most common areas are:

• Previous Day High (PDH)
• Previous Day Low (PDL)
• Previous Week High (PWH)
• Previous Week Low (PWL)
• Equal High (EQH)
• Equal Low (EQL)
• Swing High
• Swing Low

These are all potential liquidity zones.

Buy-Side Liquidity

Definition

Buy-Side Liquidity (BSL) is liquidity located above price, commonly associated with buy-stop orders, including stop losses from short positions.

Example

3400 ───────── 3400 ───────── 3400
             ↑ Equal High

Price = 3390

The market moves above 3400 and triggers the buy stops.

Then, price reverses and moves downward.

➡️ This can be called a Buy-Side Liquidity Sweep.

Sell-Side Liquidity

Definition

Sell-Side Liquidity (SSL) is liquidity located below price, commonly associated with sell-stop orders, including stop losses from long positions.

Example

3300 ───────── 3300 ───────── 3300
             ↓ Equal Low

Price = 3320

The market moves below 3300 and triggers the sell stops.

Then, price reverses and moves upward.

➡️ This can be called a Sell-Side Liquidity Sweep.

Gold Example

Scenario

Previous Day High = 3400

During the London Open, Gold moves up to 3405.

Retail traders enter Buy positions.

Five minutes later, Gold drops to 3375.

➡️ This could be a Liquidity Sweep, especially if price quickly reclaims the 3400 level and subsequent market structure confirms the reversal.

Liquidity Sweep vs. Breakout

Liquidity Sweep

• Price temporarily moves beyond a key level.
• Price quickly returns back inside or beyond the level.
• It may lead to a reversal.
• Confirmation is important before entering a trade.

Real Breakout

• Price breaks the level with strong momentum.
• Price holds above or below the broken level.
• Market structure supports the breakout.
• Price may continue in the breakout direction.

Entry After a Liquidity Sweep

Professional traders may use the following process:

1. Wait for a Liquidity Sweep.
2. Look for a Market Structure Shift (MSS) or CHoCH.
3. Identify an Order Block or Fair Value Gap (FVG).
4. Wait for confirmation.
5. Enter the trade according to the setup.

Gold Trading Example

1. Daily Bias = Buy ✅
2. London Open produces a Sell-Side Liquidity Sweep.
3. A Bullish MSS forms.
4. Price retraces into a Bullish Order Block.
5. Buy Entry.
6. Stop Loss = Below the Liquidity Low.
7. Take Profit = Previous High or another relevant liquidity target.

Professional Workflow

Liquidity Zone
       ↓
Liquidity Sweep
       ↓
MSS / CHoCH
       ↓
Order Block
       ↓
FVG
       ↓
Entry
       ↓
Take Profit at Next Liquidity

Common Mistakes

❌ Treating every breakout as a Liquidity Sweep.

❌ Entering immediately after a sweep without confirmation.

❌ Ignoring the higher-timeframe trend and bias.

❌ Trading around major news without understanding how news can create rapid liquidity grabs and false moves.

Pro Tips

✅ Always consider the Daily and Weekly Bias before taking a trade.

✅ After a Liquidity Sweep, wait for a Market Structure Shift for confirmation.

✅ Gold can produce liquidity sweeps frequently around the London and New York sessions, although no session guarantees a sweep.

✅ Make it a habit to mark the Previous Day High (PDH) and Previous Day Low (PDL) on your chart every day.

🎯 Homework

Open the Gold (XAUUSD) chart on TradingView and:

1. Mark the Previous Day High and Previous Day Low.
2. Find Equal Highs and Equal Lows.
3. Look for areas where a Liquidity Sweep occurred.
4. Check whether an MSS or CHoCH formed after the sweep.
5. Record what happened next and compare the setup with your higher-timeframe bias.