A Liquidity Sweep occurs when the market makes a sharp move beyond a significant high or low — such as a previous day's high, a swing high, or an equal-high formation — triggering the stop-loss orders of retail traders positioned on the other side. Institutional players use these sweeps to acquire liquidity at favorable prices before reversing the market.
In ICT terminology, liquidity pools sit above equal highs (buy-side liquidity) and below equal lows (sell-side liquidity). The market is constantly drawn toward these pools. A sweep above buy-side liquidity allows institutions to short into the retail long stops being triggered; a sweep below sell-side liquidity allows institutions to buy into retail short stops.
The sweep-and-reverse pattern is one of the highest-probability setups in SMC trading. The confirmation entry comes after the sweep: price breaks back through the swept level, a Fair Value Gap forms in the new direction, or a market structure shift occurs on a lower timeframe. The origin of the sweeping move — often an order block — becomes the logical target.
When journaling liquidity sweeps, record the type of liquidity swept (equal highs/lows, previous session high/low, major swing), the session it occurred in (London, NY open), and how many pips/ticks beyond the level price extended before reversing. This data helps you calibrate entry precision over time.