What Is a Liquidity Sweep?

A liquidity sweep (also called a stop run) occurs when price pushes through an obvious level—such as equal highs, equal lows, a prior day high/low, or a round number—to trigger clustered stop orders and resting liquidity. The sweep typically shows up as a fast wick that pierces the level and then rejects, often followed by directional follow‑through in the opposite direction.

Sweeps do not require a full reversal. Sometimes price sweeps one side of the range to gather fuel, then continues in the original direction. Your job is to identify the context and choose the right play: reversal, continuation, or range re‑entry.

Why Liquidity Sweeps Are So Common in Crypto

Crypto markets are 24/7, heavily leveraged via perpetual futures, and dominated by algorithmic flow. Large participants and market makers seek liquidity to fill size; the cleanest place to find it is around retail stops. This structure creates recurring dynamics:

• Leverage and forced flows: Liquidations on perps create forced buying/selling once thresholds hit.
• Session shifts: Asia–Europe–US handoffs concentrate liquidity around session opens and overlaps.
• Obvious levels attract stops: Crowded areas become magnets for a sweep.

In short, crypto often moves level → sweep → decision. If you can anticipate the sweep, you can plan the decision.

A Practical Framework: From Map to Trigger

Use a top‑down map and a bottom‑up trigger. This keeps you aligned with the broader trend while timing entries with precision.

Reading the Chart: What a Textbook Sweep Looks Like

The key is not the exact numbers but the behavior: sweep beyond a well‑watched level, visible wick, evidence of trapped traders, and decisive rejection.

Three Core Sweep Plays

1) Sweep‑and‑Reversal

Use when a market is extended into resistance or support. After a sweep of the extreme, price rejects and reverses.

• Entry: Limit/market on the first pullback after displacement away from the swept level (5m/15m).
• Invalidation: A clean close back above the swept high (for shorts) or below the swept low (for longs).
• Targets: Mid‑range, prior day open, or opposing liquidity pool.

2) Sweep‑and‑Continue

In trends, price may sweep counter‑trend liquidity and then continue in the underlying direction. Think of it as a smart pullback that shakes out weak hands before trend resumption.

• Entry: After a downside sweep in an uptrend, buy the reclaim of the level; opposite for downtrends.
• Invalidation: Back inside the swept zone with momentum against you.
• Targets: Trend extension to recent highs/lows or a measured move (e.g., last impulse range).

3) Range Re‑Entry (Fake Breakout)

Classic fake breakout. Price sweeps outside the range and quickly re‑enters. The trade is to target the opposite side of the range.

• Entry: On re‑entry close inside the range followed by a lower timeframe pullback.
• Invalidation: Acceptance back outside the range.
• Targets: Range mid, then opposite boundary.

Order‑Flow and Derivatives Tells

If you trade on crypto exchanges that offer futures, enrich your read with derivatives data. You don’t need a quant stack—just a few practical signals:

• Open Interest (OI) flush: A sharp drop in OI at the sweep often signals long/short capitulation and can precede reversal.
• Funding and basis: Elevated positive funding into resistance increases the odds that an upside sweep traps longs; negative funding into support increases downside sweep risk.
• CVD/Delta: If cumulative volume delta rips up through the sweep but price can’t hold above the level, that divergence hints at absorption and potential reversal.
• Liquidation heatmaps: Clusters of liquidations just beyond obvious levels often act like magnets—price tags them, then reverses.

Risk Management: Stops, Sizing, and R‑Multiples

A great read with poor risk control still loses money. Anchor your plan to hard numbers.

Keep your average R multiple realistic: target 1.5R–3R on clean plays. Use partials to lock risk early (e.g., take 30% at 1R, move stop to breakeven after structure confirms).

For Canadian traders using CAD pairs on platforms like Newton or Bitbuy, the same math applies. If you hedge with perps on a different venue, ensure your spot and futures sizes match your risk plan and consider maker/taker fees in your expectancy.

Timing and Sessions: When Sweeps Are Most Likely

Liqudity concentrates around time‑based events. Build a simple timing checklist:

• Asia open (approx. start of the new UTC day), Europe open, and US morning
• Top‑of‑the‑hour prints on lower timeframes
• High‑impact macro releases (if you trade BTC/ETH correlations)
• Exchange maintenance windows or funding intervals for perps

Sweeps love session highs/lows. Map them and expect a probe beyond those boundaries during overlaps.

Execution Playbook: Step‑by‑Step

Chart Patterns That Pair Well with Sweeps

• Fair Value Gap (FVG) or imbalance: After a sweep, price often seeks nearby imbalances; entries at the first tap can be high‑RR.
• Break of structure (BOS): A sweep followed by a BOS on the entry timeframe confirms a shift in control.
• Divergences: RSI/OBV or CVD divergences at the sweep strengthen reversal odds.
• VWAP/Anchored VWAP reclaims: Reclaiming session VWAP after an upside sweep is a clean short trigger; opposite for longs.

Case Study: BTC Fake Breakout Into US Open

Suppose BTC consolidates between 59,200 and 60,000 overnight. Into the US open, funding flips positive and OI climbs—late longs anticipate breakout. Price spikes to 60,350, triggers clustered buy stops and liquidations, then closes the 15‑minute candle back under 60,000 with heavy volume. On the 5‑minute chart, a strong bearish displacement candle forms; the next pullback retests 60,000 from below. You short the retest with a stop at 60,480 (above the wick), risking 1% of equity. First target: range mid near 59,600; second: range low at 59,200. OI declines on the drop—a good sign that trapped longs are unwinding. You take 30% at 1R, move stop to entry after a minor structure break, and trail the rest. This is a textbook sweep‑and‑re‑entry trade.

Common Mistakes and How to Fix Them

Platform and Execution Considerations

Whether you trade on global venues or Canadian platforms, execution details matter for your expectancy:

• Spot vs perps: Spot is simpler for beginners; perps add leverage and derivatives signals but increase risk.
• Fees and order types: Maker fees plus post‑only orders can improve net P&L, especially if you trade pullbacks after a sweep.
• CAD pairs and funding: If you trade BTC/CAD or ETH/CAD on a local platform and hedge on perps elsewhere, track conversion and transfer frictions. Avoid over‑hedging.
• Slippage control: Use limit orders near reclaimed levels; avoid chasing wicks unless your plan accounts for volatility.

Building a Sweep Scanner and Journal

You can semi‑automate the hunt without coding a full algorithmic trading system. Create a lightweight checklist and scanning routine:

Psychology: How to Avoid the Sweep Trap

Sweeps prey on FOMO and the need to be right. When price rips through a level, your instincts scream “breakout!” The edge comes from doing the opposite—waiting to see if the level holds after the sweep. Build habits that reduce reactive mistakes:

• Pre‑commitment: Write “No confirmation, no trade” at the top of your platform’s notes panel.
• Time buffer: After a sweep, wait for a candle close or for delta/OI confirmation. The best trades rarely require split‑second entries.
• Process over outcome: Grade your trade quality, not whether this specific trade won. Sweeps produce a repeatable distribution if you follow the rules.

Altcoin Notes: Volatility, Liquidity, and Slippage

Altcoins deliver more sweeps—both opportunities and traps. Thin order books and aggressive liquidation cascades exaggerate wicks. Adapt your playbook:

• Use wider stops (ATR‑adjusted) and smaller size to keep dollar risk constant.
• Favor pullback entries instead of trying to top‑tick the wick.
• Target closer measured moves and take profits sooner; leave a runner for range extremes.

Risk and Compliance Reminders

Crypto trading involves substantial risk. If you are based in Canada, review your platform’s registration status, understand how your exchange handles client assets, and keep meticulous trade records for tax reporting. Maintain a written risk policy, cap leverage, and avoid concentrated bets in illiquid tokens.

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