Liquidity Sweep

A Liquidity Sweep (often called a Stop Hunt) occurs when price briefly pierces a prior obvious high or low — triggering the stop-losses and breakout orders clustered there — then reverses sharply back into the prior range. These highs/lows are referred to as 'liquidity pools' since stop-losses and pending orders tend to accumulate near them.

One of the core assumptions in SMC/ICT theory is that moving large positions requires sufficient counter-liquidity, and stop-losses plus pending orders provide a ready source of that liquidity. Large participants therefore tend to 'sweep' this liquidity first before driving price in their intended direction.

The key to identifying a liquidity sweep is whether price quickly reclaims the level after piercing it: if price pierces a prior high/low and reclaims the range within the same or next few candles, forming a clear reversal candle (engulfing, pin bar), the sweep is more credible. If price continues closing beyond the level, it's more likely a genuine BOS rather than a sweep.

Liquidity sweeps are often combined with CHoCH and Order Blocks to form a complete reversal trading sequence: first watch for a sweep of a high/low, then wait for a CHoCH to form on that timeframe, and finally enter on a retracement into the Order Block or FVG created after the sweep — a standard workflow in many SMC strategies.