Liquidity & structure · Lesson 9 of 20
Liquidity and the sweep (XS)
Liquidity is where orders are waiting: stop-losses and pending orders above highs (buy-side) and below lows (sell-side). Price moves from one pool of liquidity to the other.
| External liquidity | Internal liquidity |
|---|---|
| Monthly high / low and open / close | FVG: fair value gap |
| Weekly high / low and open / close | IFVG: inversion fair value gap |
| Daily high / low and open / close | Internal range on the lower timeframe |
| Major swing high / low (H1 or higher) | |
| Equal highs / equal lows |
The sweep
A sweep (MSNR writes it XS) is a wick through a liquidity pool with the body closing back inside. The stops were taken but the market did not accept the new price. A key level with a sweep right next to it is much stronger.
Rules
- Before a trade, ask: which liquidity has been taken, and which is the next target?
- If sell-side was just swept, expect a move toward buy-side, and the reverse.
- Use the next liquidity pool as your take-profit.
Common mistakes
- Entering just because a sweep happened. You still need a level and confirmation.
- Putting your own stop exactly at equal highs or lows, where everyone else's is.
Check yourself
1. Which of these is external liquidity?
2. Price wicks below equal lows and closes back above them. What happened?