Liquidity and stop hunts

For a big fund to buy a huge volume, someone has to sell it that much. That volume sits where ordinary traders keep their stop-losses. A cluster of stops is called liquidity.

Where liquidity sits

• beyond equal highs and lows that price has bounced from several times;
• beyond the previous day's and week's highs and lows.

Liquidity sweep

Before the real move, price often makes a sharp false breakout: it takes out the stops beyond a level, collects volume and quickly reverses.

If you can't see where other traders' stops are, the liquidity may be yours. The SMC Sweep indicator looks for exactly these false breakouts (SSL and BSL marks on the chart).