Transcription
A lot of people get this wrong. So, I'm going to tell you the difference between a liquidity sweep and an actual market reversal.
First, we need to understand how liquidity works. In a nice uptrend, okay, lows, swing lows are your liquidity, not your highs. So, we have all this liquidity built here. We're expecting price to sweep these and then continue higher with the trend.
In a downtrend like this, swing highs, these are your areas of liquidity. So, you are expecting price to sweep these highs, stop out everybody, and then again continue lower with the trend. And let me show you how to do it on the charts.
First thing you have to see is, okay, we're in a clear downtrend here. And where is our last break of structure? You can see we broke structure to the downside here, giving us a protected high up here and a swing low down here. So, according to structure, we should be putting in a lower high, lower low. So we are looking for swing highs to sweep within this high to this low.
You can see here we have a nice swing high. So this is an area of liquidity and you can see here we have a nice swing high too which is another area of liquidity. However, if we come back up and if we close above this protected high here, this is not a liquidity sweep. This is a shift in structure and we would be expecting higher lows and higher highs. So remember swing highs between your protected high and your low is where to find liquidity, not above your protected high.
As you can see, we sweep that liquidity mentioned and then we get the real move lower. By choosing the right liquidity sweep, it's going to be an A+ setup. If you're getting it confused, you're going to get stopped out. Terrible setup. I made a free setups rating guide so you can tell all the differences between a good and bad setup. Just comment the word guide and I'll send it over.