Transcription
Yes, my people. Hope you are all doing well.
So, in today's video, I want to show you the difference between a liquidity sweep, which is where we take a high or low, stop people out, and a rip in the opposing direction, and an actual break of structure where you can see we take a higher low, but we get continuation. We take a higher low, we get continuation. And it's just very small things that you can look out for and understanding why we sweep and why we get breaks of structure that can help you say, "Okay, this is likely to be a sweep," or "This is likely to be an actual strong break of structure." So, without wasting any of your time, let's get straight into it.
So, there's certain characteristics we want to see when we're looking at a liquidity sweep. Okay, we want to see a nice, pretty, instant reaction. We want to see a small internal shift. And why? Let's start with the first one. What, what is a liquidity sweep? Well, it's where there are, we say liquidity pools, but just highs and lows. Let's just keep it simple. Highs and lows where people tend to have their stop loss, stop loss here, stop loss here if they're buying. So, we just want to sweep them out and then continue higher. Or the other way of looking at it is, a lot of people will see this as an area of support, a market structure shift. Once we close below here, they will then start looking for shorts in this area, targeting lower prices. And what did we do? Thank you very much. They became our liquidity. So, you can see they thought this was a break of structure, but indeed, this was just liquidity.
So, what can we do to help identify this? Well, remember, if, so why are we stopping them out? So, we're stopping them out because price wants to take their orders, use that as fuel to push higher. So, we want to make sure the main objective is we are taking their money. Okay? We want to make sure they're cooked. There's no way back for them. So, if we think about that, those who have entered shorts on this break here, what would they, if price did something like this, what would a lot of traders do? Let's say they entered on the breakout, stop loss here. Been, been, when they see this high there, they're going to put their stop loss there. So, it's a lot less money being, they're cooked a lot less, right? They're saving money, or they might even go break even and they don't lose any money at all. You want to take as much money from them as possible. So, we don't even want to give them the chance to really manage their stop loss or go break even. We want to see a pretty violent reaction and just completely think, "Yeah, you know, when you enter a trade and it just goes completely against you, you're like, crap. Like, forget zero draw down. I had zero TP." That's what we want to see. So, this opportunity here, once they've entered their cells, can you see it gave them zero opportunity to manage their stop loss, etc., or anything, and we just rip higher. This is what we want to see. So, if we see that, we're like, "Okay, boom, that's a good chance of it being a liquidity sweep."
And the last one is a small internal shift. What do I mean? Well, when we look at internal structure, so let's say this is my external liquidity sweep, right? This is what price did and price swept this low. I ripped up. We can always use structure to help aid our decisions. So, if we sweep this low and this blue being internal structure, if we sweep this low here and then boom, get that small internal shift from lower highs, low lows, lower highs, lows during this expansion phase, lower to now sweep and then immediate internal shift higher. Again, this is a more probable scenario that this is going to be a liquidity sweep and price are going to stop them out and continue straight higher. So, you want to see an instant/invalid reaction and you want to see a small internal shift. And I always do the same thing, but the opposite in an uptrend. So, sorry, downtrend. So, this is my external structure. This is my internal. And again, what are the two things we want to see? Well, the first thing we want to see is a violent reaction. So, it doesn't allow price people to go break even here. We can see here, we take it and then we just reverse. So, they didn't get, they didn't go break even. They lost all their money. Perfect. We want to see that small internal shift. Here, we can see price offered that small internal shift as soon as we swept liquidity, telling us, "Okay, this is a fake out and now we can continue lower." So, that's good.
What can help us convince it is a break of structure? It's kind of the opposite. So, instead of a violent reaction, we want continuation, right? And we want strength. The easiest way I can make you stop getting liquidity swept, making sure it's a break structure, just waiting for a new break of structure after that. So, if we do this, right? Let's say you're not sure if this is a liquidity sweep or a break of structure, just wait for the next break of structure. So, now you're assuming that this is a shift in structure to the downside. In order for that to be correct, price should do this. By doing that, you know now that this is not a liquidity sweep and this is a break structure because even based on our previous stuff, right, everyone's going to move their stop. They got new highs here. We didn't collect that fuel and instant reaction higher. So, now you know that this is not a liquidity sweep, but a real break of structure.
Another thing is you want to see is strength. So, a general rule of thumb you can say is if this leg creates one or more fair value gaps, this isn't as nice, but it's still valid. If it creates one or more fair value gaps, then you can assume that this is going to be a real break of structure because we get a nice candle close. Okay, we want a nice candle close, not a small one. This is a nice body close, creates fair value gap within this leg, shows their strength, then we can have more confidence that this is a real break of structure. Another thing as well is by looking at that internal structure we saw, right? We were focusing on the lower time frame for liquidity sweep. That's also going to be a big, big tell. So, we can use them together. For example, this is that internal structure. So, my internal shift is going to be above this high here. If we sweep this and then do this, I'm not immediately thinking, "Oh, what's liquidity sweep?" Because we need to take this high. We haven't taken this high, right? Then I know this is still a potential break of structure and I can still confirm my bearish bias. New break structure. Boom. I'm confident now that this is a real break structure.
So, let's uh go straight into the chart and see what we have here. For example, beautiful. Again, it's the same on any time frame. We had these lows. We swept them and immediately reversed up. So, did it fit crew, uh, two, crew, the two pretty instant reaction and internal shift? Well, let's see. Breakout traders who have entered on this breakout, right? Or on the break and retest, that's what they normally do. They break out here, as price retests, they enter. They're like, "Yeah, we're going to dump now. Target, let's say these lows down here, random stop loss here, right?" What have they had the chance to go break even? Let's see. Boom. Have they had a chance to move their stop loss at all? Okay, sweet. I'm tagged into the trade. Going against me. Going against me. Going against me. Going against me. I'm cooked. Can you see that? They couldn't move their stop loss to break even. They couldn't really minimize risk. This is that reaction we want to see that is telling us that this is likely to be a shift, uh, sorry, a sweep.
Now, let's go down to the lower time frame and see if we got any internal shift because that is the final step. Okay, now this is very small, but it's still valid. Okay, but it is very small, but it's context. Okay, not everything's going to be perfect. We swept those lows, right? And immediately after sweeping those lows, what do we do? We got a small internal shift. So, knowing that now, right? Knowing that we swept those lows, swept, swept those lows, beautiful reaction, internal shift, I can say that, "Okay, this is now a good place to long to target higher prices." And boom, you made enough money on that leg there. So, let's see this. So, yes, in this situation, we did create bearish value gaps in this leg, but you can see after sweeping, there was no follow-through, right? No new break of structure. If we want to be safe, right? No chance to move the stop loss, internal shift, straight away, boom, price wants to go higher.
Let's look at, okay, some more examples here. Again, this is the one-minute time frame. We sweep those lows. Any chance to go break even? No. As soon as we swept that low, instant reverse. And here, in this range, it's a bit higher, but here is the internal shift. All right. So, boom. There is the internal shift. You can see sweep. No chance to go break even. Internal shift. What am I going to do? I'm going to enter my long position. Let's say stop loss below this low, target high prices. Boom. Because I know now that this is a sweep and not a real break of structure.
Let's see if we can find some real break of structure examples. Well, this scenario here, okay, can you see after breaking this high here, right? We got a bit of follow-through and what did we get? We got that small mini low, higher high. So, what does that mean? That means those who have entered the trade, for example, they can move their stop loss below this low now. They can, if they're aggressive, go break even. So, this isn't likely going to be a liquidity sweep. This just means we're going to pull back and continue higher. Let's look at some more. Okay, exact same thing here. We break structure here to the upside. And what do we do? We come back and we push higher. So, we give the chance for traders to move their stop loss, etc. Here, what does price do? Come, push higher. It's not a sweep. Let's look at some more examples.
It's a great example of a sweep. Absolutely amazing example. So, let's say we took this low here. And now we want to ask ourselves, "Okay, is this a break of structure or is this a liquidity sweep?" Well, the first thing I want to see is boom. Now, I'll know if it's a break of structure if we do this. We haven't done that yet. So, right now, we've just, let's see how price reacts as we come back. Okay, people have entered on this retest now of this low. The price has come straight back up. So, no reason for me to think it's a break of structure yet because we haven't got that low. I can see we swept it, pretty much immediate reaction in those who have entered on a retest are currently cooked. Where is my internal structure? My internal structure, I can see here without even going on a lower time frame. Low, high, low, high, low. Interesting. So, my internal structure is this high here. Let's see if price decides to take that or not. I want a nice close above this internal structure. Boom. So, okay. Everyone who's entered on a retest here, they have zero profit. They've entered on this large candle. Price has gone straight up and we've got an internal shift. So, guess what? Doesn't take a genius to say, "Okay, this is now a sweep and I'm expecting higher prices." As we saw, what did price do? It rips all the way up and thank you. Delivers us a new high and we were bullish as soon as we saw this based on our criteria.
So, I hope that helped. Any questions, etc., feel free to drop it in the comment section below. I do have a premium Discord. You can watch me live stream my trading every single day and get my full course. Link is in the description below. Apart from that, appreciate your time. As always, if you do like the video, please leave a like or subscribe. It goes a long way. And I'll catch you in the next.