Liquidity sweep explained: stop hunts, swing failures and how to use them

What a liquidity sweep is

Many traders place their stops just beyond an obvious turning point: above the last swing high if they are short, below the last swing low if they are long. The name comes from that. The orders resting there are the "liquidity", and a move that runs through them and immediately reverses has "swept" them. Whether a sweep tells you anything about what happens next is a claim to test, not something this guide asserts. What the app does is find the level and say exactly when price went beyond it and how the bar closed.

The level is the most recent confirmed swing that no later bar has traded beyond. A swing high is a bar whose high stands above a set number of bars on either side of it; a swing low is the mirror. That is the same swing scan Market Structure, Auto Fib Retracement and Equal Highs/Lows use, so all four agree on where a swing is. A swing is only confirmed once that many bars have closed after it, so a level appears a few bars late and is never revised.

A level stays live until a bar's wick trades beyond it. The wick is enough: the level was the price nobody had traded through, and now somebody has. That bar is the one the comparisons are about. On the next bar the level falls back to an older swing that is still untouched, if there is one, or to nothing.

Liquidity sweep settings

1. Swing strength (bars). How many bars on each side a high has to stand above, or a low below, to count as a swing: five by default, from 2 to 20. A larger number finds fewer, more prominent swings, and confirms each one later.
2. Max level age (bars). How far back a swing can be and still be read as the level: 100 bars by default, from 10 to 300. A swing older than this is no longer tracked, even if price has never come back to it.

How to use a liquidity sweep in a strategy

These are the comparisons SixOne8 offers, in the builder's own words. All four are moments: true only on the bar they describe.

1. Price sweeps the high. The bar traded above the last swing high and closed back below it. The wick is what trades above; the close is what comes back.
2. Price sweeps the low. The bar traded below the last swing low and closed back above it.
3. Price breaks above. The bar closed above the last swing high. The level held until this bar, so the close before was on the near side by definition.
4. Price breaks below. The bar closed below the last swing low.

Liquidity Sweep(strength 5) on 1h  ·  price sweeps the low

Read it as a sentence: on the 1-hour chart, the bar that just closed traded below the most recent swing low still standing and closed back above it. That is what the scanner evaluates at each hourly close, and what the alert will say if this is the condition that completed the strategy.

Sweep or break: the close decides

A sweep and a break begin the same way, with price trading beyond the level. They differ only in where the bar closes. A bar that closes back inside is a sweep; a bar that closes beyond is a break. A bar can never be both. Because the level ends on that bar either way, a strategy that wants "a sweep, and not a break" needs nothing extra. Choosing the sweep comparison already rules out the break.

Two neighbouring indicators answer nearby questions. Equal Highs/Lows needs two swings at the same price before it has a level, which most swings are not. Previous High and Previous Low take the extreme of the last N bars whether or not it was a swing, so their level slides with the window. Liquidity Sweep reads one specific turn on the chart and holds it until price takes it. Most strategies that use a sweep pair it with context from a higher timeframe, such as market structure or which half of the range price is in.