Liquidity Sweep and Stop Hunt
A sharp, brief price move just beyond a well-known support, resistance, or stop-loss cluster, triggering stop orders before quickly reversing back in the opposite direction.
A liquidity sweep, sometimes called a stop hunt, is a sharp, brief price move just beyond a well-known support or resistance (see Kaavon's "Support and Resistance" glossary definition) level, specifically where many traders are likely to have placed stop-loss orders clustered just past that level, before price quickly reverses back in the opposite direction. The brief move triggers the clustered stop orders, providing a pocket of liquidity that larger participants can trade against, after which price often reverses since the move wasn't driven by genuine, sustained directional conviction.
Distinguishing a genuine liquidity sweep from an actual breakout (see Kaavon's "Breakout (and Breakdown)" glossary definition) in real time is one of the harder practical judgment calls in technical analysis, since both initially look like the same sharp move past a key level — the key differentiator typically only becomes clear after the fact, based on whether price genuinely continues in the breakout direction or quickly reverses back through the level it just breached. This dynamic is part of why some traders deliberately place stop-loss orders somewhat further from an obvious, widely watched level, specifically to avoid being caught by a sweep targeting the more crowded, obvious stop-loss cluster.
Examples
- A liquidity sweep might briefly push price just below a well-known support level, triggering clustered stop-loss orders, before quickly reversing back above that level.
- Some traders deliberately place their stop-loss orders somewhat further from an obvious support or resistance level specifically to avoid being caught by a liquidity sweep targeting the more crowded, obvious cluster.