Trade the stop hunts that precede major institutional moves.
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Overview
Liquidity Sweeps β also called stop hunts or liquidity grabs β are a cornerstone of the Smart Money Concepts framework. Retail traders tend to place their stop-loss orders at obvious levels: just below a swing low or just above a swing high. This creates a predictable cluster of orders that institutional players actively seek to trigger.
When an institution needs to fill a large buy order, it may first push price downward to trigger the sell stops below a significant swing low. Those triggered sell orders provide the buy-side liquidity the institution needs. Once filled, the institution reverses price aggressively upward β leaving behind a sharp wick and stranded retail traders.
Trading liquidity sweeps involves monitoring for price to breach a well-established swing level, waiting for a rapid reversal candle (pin bar, engulfing, or doji) that signals the sweep is complete, and entering in the direction of the reversal. The key is distinguishing a true sweep from a genuine breakout β sweeps are characterised by a fast return within the prior range, while breakouts consolidate above or below the level.
Combining sweep analysis with market structure and time-of-day filters (London open, New York open) significantly improves accuracy, as institutional activity is highest during these sessions.
Strategy Code
This is a TradingView Pine Script strategy example for this page concept. Paste it into the TradingView Pine Editor, add it to your chart, and run it in the Strategy Tester.
//@version=6
strategy("Liquidity Sweeps Strategy", overlay=true)
emaFast = ta.ema(close, 20)
emaSlow = ta.ema(close, 50)
bullStructure = close > emaFast and emaFast > emaSlowThis is a thinkorswim ThinkScript strategy example for this page concept. Open thinkorswim, create a custom strategy, paste the script, and apply it to your chart.
def fast = ExpAverage(close, 20);
def slow = ExpAverage(close, 50);
def liquidityGrab = low < Lowest(low, 10)[1] and close > open;
def buySignal = close > fast and fast > slow and liquidityGrab;
def sellSignal = close < fast;Join thousands of traders who use auto-Trading to execute this strategy automatically, 24/7.
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