How to Identify Liquidity Sweeps

So, you understand some market maker concepts, and you understand how draws on liquidity work, how liquidity sweeps work, order blocks, fair value gaps, etc. But wait, something seems to be wrong. For some reason, even though the liquidity has already been taken out, there is no reversal. Or maybe you see an order block, but it simply gets traded through. What's up with that? If you've been in a situation like this, don't worry. Most people just never realize that there are 2 other factors that you can use to determine if that order block or liquidity sweep or whatever smart money concept is the right one. So let's get into it. So as a general rule of thumb, there are only 3 things that you need to remember when it comes to determining if, you know, the liquidity sweep is the liquidity sweep, and that is timings, levels, and behavior of price. Most people understand levels. You know the key levels, you know what to look for, for example, an order block or a fair value gap or a Fibonacci retracement. You understand the levels. But what you don't understand, and what you've probably never been exposed to, is timings and behavior of price. And that's what gets you, because it's not just price theory. The market makers do not program their algorithms based on simply price action, or simply based on levels, or simply based on liquidity. There is also a timing aspect to it. That's why news events happen at certain times, and that's also why price tends to get manipulated and liquidity is engineered prior to the news event in order for the market makers to stop everybody out. It is basically called time and price theory. For a reason. And that's one of the 2 premises that we'll be getting into in this video, which is timings. Like, you already understand levels, but we're going to get into timings. And the second premise that we're going to get into is behavior of price. How does price react at the level that you are looking at at the exact time that you're supposed to be looking at it? Is it giving you the reaction that you're supposed to see in order for your trade idea to play out? If there isn't, well, clearly You're wrong. And if there is, well, that's going to be an A+ trade setup. So let's get into timings first. The only rule that you need to remember is that for every pair, there is prime, like, trading hours. And if a liquidity sweep or an order block or a fair value gap or whatever it is is not happening in the proper trading hours for the pair, it is more likely than not a false sweep or simply a move to engineer liquidity. So what are the prime trading zones? Well, basically, you simply need to remember this: if you are trading the EUR/USD, for example, that is a pair that is rooted in Europe, which also means during the London trading hours. So if you're trading the EUR/USD, you can expect most of the volume to come during London trading hours and also the US trading hours. Specifically, you can expect most of the daily trading volume of the day to come in from London morning to about 5 PM London, because that's when the banks, you know, everyone from the banks or the market makers, they go home and they have dinner. Like normal human beings. But on the other hand, if you're trading something like the Aussie dollar to the New Zealand dollar, those are primarily Asian pairs, so you can expect most of the trading volume to actually occur during the Asian session. And so how do we apply this to crypto? More often than not, your prime trading hours are going to be during the London and also the New York session. And sometimes you do get moves that happen during Asia, but all in all, these are the only trading sort of windows and trading times that you want to look for. Number 1, during Asia, is going to be roughly between 8 PM to about 11 PM New York. The London Open is going to be around 2 AM to 5 AM New York. The New York Open is going to be roughly between 8 AM to about 11 AM New York. And then you have the New York afternoon, which is roughly between 1:30 PM to about 4 PM New York. Now, if your trades are not occurring during these time windows, you have a problem on your hands. Because all the times between these prime trading hours are called gap times. And gap times are prime, just, times for the market makers to trick people into thinking that price is going a certain way, but in reality, they are simply engineering liquidity. So this is the first thing that you can add into your trading right away, which is time. And there is going to be a second one that I will talk about, and it is called Quarterly Theory. Now, this is a concept developed by Trader Day from Twitter, and this is something that has been an immense help to my trading recently. And all you need to understand about Quarterly Theory is that, you know, there are 4 sessions every single day, and that is going to be the Asia, London Open, New York Open, and New York Afternoon. And you can split all 4 of these sessions down into 6-hour trading blocks. And within these 6-hour trading blocks, right, that's 1, 2, 3, 4, that's a quarter, quarter, quarter, quarter, hence Quarterly Theory. But you can also break that down even more, which is in each session there are also 4 quarters, and you can break down these quarters into 1.5-hour chunks. And so, for example, during the London session, you have the 12 AM to 1:30 AM—that's your Q1. 1:30 AM to 3 AM—that's your Q2. 3 AM to 4:30 AM—that's Q3. And 4:30 AM to 6 AM—that's Q4. And then you move on to the next session. So we'll get into like examples of you know how the timing plays into it and how quarterly theory plays into it. But all you need to understand is that in quarterly theory, there are only two ways that market is always playing out at any given time, and that is AMDX and XAMD. A stands for accumulation, M manipulation, D stands for distribution, and X can either be— well, it's a little bit special because it can either be reversal or a continuation of the distribution. And once you pair Quarterly Theory with prime trading zones plus levels plus behavior of price, you will have the ultimate toolkit in order to determine if the liquidity sweep is going to be the liquidity sweep, and you will increase your trading accuracy by a lot. And the last thing that I want to jump into Before we get into the examples is that if you take one thing away from this video, all you have to remember is this: the accuracy of Smart Money Concepts is heavily reliant on 3 things: timings, levels, behavior of price. If you have one out of the 3, well, clearly it is not going to be an A+ setup. In fact, it's probably going to stop you out. If you have 2 of them, well, it's all right. But when you have 3 of them, that's when you get the A+ setups. And if you simply remember that, you will be golden. So now let's get into some very specific examples, and I'm going to start on EUR/USD, and then we're going to move on to Bitcoin. And on EUR/USD, um, this week has actually been amazing for just, you know, time-based trading, and it's going to be a really good example for me to show you how timings, levels, behavior, price plays into everything. Now, yesterday was actually a prime example of this playing out. So what you need to see here is that, okay, EUR/USD, you know, it's been pumping, but Over here, you get a failed breakout, right? Failed breakout, and then you close below the open. That's your day 1. And don't worry if you get lost here, it'll all make sense in just a bit. So this is your day 1 in the day 3 setup. Day 2 is a trending day. Day 3, which is on Wednesday, it can either be a parabolic, you know, just a trend trade, right? Continuing the trend, or it can be a reversal. And in Wednesday's case, it was the reversal. And I actually saw the bottom coming because of one thing. So first things first, let's look at the levels. Let's take a look at this example here. You can see that price has swept liquidity here. It swept the 15-minute candle bodies over here, and then it pumped. But the first thing you might be wondering is, wow, AUC, why that is such a random level for price to have pumped? Like, you can see so much liquidity here, here, here. You have fair value gaps, blah, blah, blah, blah. Why is it that one? And whenever you come into a situation like this where you are uncertain of whether or not the price is— like, if this is the liquidity sweep, or if this is just like a false liquidity sweep, Then always remember this: timings, levels, behavior of price. Let's take a look at the levels. Level, you took out a bit of sell-side liquidity here on the 15-minute chart. Secondly, remember what I said earlier. This is day 1, day 2, day 3. I'm already sort of anticipating that day 3 is either going to be a parabolic trend trade or it's going to be a reversal. So I already sort of have my levels mapped out. Also, this is the previous day's low, which is where a failed breakout can tend to happen, which you can see like price traded below previous day's low, but then it closed back into the, you know, back above the daily open. This is called a failed breakout, which makes today a first green day. But, you know, more on that later. So I'm already sort of anticipating that day 3 is going to be, you know, maybe a reversal, right? Maybe. I don't know for certain until I pair in the third factor, which is timing. So let's look at the time here, 8:30 AM. Now, 8:30 AM is one of my favorite, you know, just trading windows. And it also falls in Q2 of the— it also falls in Q2 of quarterly theory, which is the manipulation window, which means If you get a sell-side liquidity sweep or any kind of liquidity sweep at this time here, along with all of the confluences that you have with the levels, plus you get it at 8:30 specifically when the New York markets open, that is like you just have all 3 confluences paired up. So the fact that this was happening, like this liquidity sweep was happening in Q2, gave me the second level of confluence. Third level of confluence is behavior of price. Now assuming that once you get that sell-side liquidity sweep in Q2 and you may be anticipating a reversal on, you know, this day, Well, you need one last thing to confirm the bias, which is the behavior of price. Do you see displacement? In order to view that, we're going to have to come onto, you know, say, the 1-minute chart. And let's take a look. Once 8:30 hits, you know, that's 8:30, you swept down a little bit, but eventually you do get the displacement, right, in the form of this displacement towards the upside. Strong movements towards the upside indicates market makers are interested In this trade, and the market makers are interested in bringing the markets higher. The moment you get a change of character right there, that is your swing high, and swing high gets broken. That is your change of character. Now the market structure has shifted after like you sweep liquidity sweep, form a new high, retrace, boom. That is one of my favorite setups, and if you see that happening, the timing plus the level, then that is how you confirm that that is the bottom, and that you can start going long aggressively towards the upside. So for example, price actually did retrace back into you know a fair value gap here, and also a fair value gap there in order. Order to give you an entry. And most people simply get stuck on, you know, price action. Like, oh, okay, um, let's see. Ah, you know, I get a displacement here. Okay, retracement. Okay, this is where I short. Well, sometimes that works, but more often than not, you will get, for example, an order block like that. Price comes back into it and it just blows right past it. And that's because what time is that happening? Well, that order block retracement is happening at 6 AM. Remember the trading window, 6 AM is within the gap time. And so That is simply engineering liquidity for the true move that happens at 8:30. So that is example number one. So now let's get into example number two. Remember I said that this was day one, this was day two, and day two tends to be a trending day. So if day one has a failed breakout at the high of the week, well, day two will be likely a down day. So I already had that anticipation heading into this day, and I actually actually made a couple thousand bucks on this move up here. But yeah, that's a different video. So now let's start with part 1, which is let's talk about the levels. First things first, this is your Asian range right here on the 15-minute chart. The moment that happens, right, the moment that displacement happens, boom, you have a bearish order block. Okay, your levels are confirmed. So now you want to look for a retrace back into the order block in order to take a short. But how do I know if this is the order block that, you know, is going to dump the markets? Well, next we pair in timing. Is it a part of your timing? Well, you can see that this is at 3:45 AM. New York, which is in the second hour of the London Open, which tends to be a high probability timing. In fact, most of the time I don't even trade the first hour of London. I actually trade after 3 AM because the second hour of every trading window tends to give the best probabilities. For example, the New York Open technically happens at around 7:30 AM, right? Technically. But I like the 8:30 AM window, and I love the 9:30 AM window also. More 8:30 than 9:30. But there is a reason for that, much higher probability. So the moment you get a retracement there, 345, and then you get the displacement, which is part 3, behavior of price. Is price giving you levels, timings, behavior of price? Okay, the moment you get displacement, okay, now you can confirm it. Fair value gap forms over here, and this would have been your, you know, second possible entry to get into the trade. Bam, bam, down, right? And notice how fair value gap here is also lining up with Timing, right? What happened at this time? What happened at this level? And what happened at like in behavior of price that makes this fair value gap way higher probability? Okay, so that's example number two. Now example number three is again 9:30 a.m., right? You sweep the liquidity here, and that is the low of the day. But what is occurring on timings, levels, behavior of price? Let's talk about levels. Firstly, that is your daily open, right? This is this black line here. That's where the price opened up. during the daily. Now, usually on Forex pairs, price tends to move like on a daily range, right? Daily, you tend to have about 50 pips of movement, or at least that's what I've noticed. I usually like to take my profit like around 50 pips. I wouldn't expect the price to continue aggressively once 50 pips has been exhausted. So this is your high of the day, and that is your low of the day. And you can notice here that price has already moved about 60 pips, right? From the high to the low, that's around 57 pips. And so I already know that majority of the daily move has already been expended. And behavior of price, price from the top, right? 1, 2, 3, 4 dumps, right? Usually when you get 3 levels of drop, that is usually like a reversal signal and price, you know, tends to reverse. But now we're getting 4. So this trend has definitely, definitely been exhausted. At least that's what I was thinking at the time. Okay, now you have your levels, right? You have the levels, you have the premise. Now let's look at timing. What happens at 9:30 AM? 9:30 AM, you get the liquidity sweep at the level, right? That's your level. You might think, wow, that is a very random liquidity, you know, level, but it's also finding support at the previous day's high right there. And that is also another, you know, level that you can add to your confluence. And timing, 9:30, boom, get the liquidity sweep. And number 3, behavior of price. Do you get an instant reaction to the upside? You do. Once you do, Then now you can start looking for a retracement, getting on the trend, and then voilà. Very, very straightforward. You just need to remember timings, levels, behavior of price. Now let's get into Bitcoin so that I can give you, you know, more of a, you know, crypto example to show that this also works in crypto. This works exceptionally well in crypto, actually. So I think I marked out a couple of levels, just, you know, just recent examples so that this— you guys can go ahead and study this on your chart yourself. So 2 AM, Over here, price actually filled in the fair value gap and started going up, although eventually it did come down because the buyers, you know, basically this was like a very key quote-unquote resistance level. But still, how can I make this fair value gap here very high probability? For example, this fair value gap here was not so high probability. It just completely got traded through, right? Again, what on this fair value gap here, what time does it get filled? 1 AM. That's a gap time. You're not supposed to be trading at that hour. But on 2 AM, again, level, fair value gap, 2 AM timing, behavior of price, immediate displacement, price retraces back into the fair value gap, and then boom, right? You take off. Now I know that this is not the best trade in terms of risk to reward, but still you get the idea. Okay, now let's move back here. Now this is another example. You have just swept all of these relatively equal lows, but how do you know that price is going to start going back up? I know that we have the benefit of hindsight here, but I do want to share. This is the principle that you need to keep in mind, and as long as you keep this principle in mind and you apply it into your own chart, you are going to see the results. So you have swept all of these relatively equal lows here, but at the same time, you also have more relatively equal lows here, here, here, here, blah blah blah, right? There is always another liquidity level that you will be able to see. But how do you know that this is the bottom and that price will have a reaction over there? Again, let's go back into timings, levels, behavior of price. Level. You already have the level. Timing. Timing. What time is this? 8:15 is when you get a displacement to the upside after sweeping that liquidity. So this whole block here essentially becomes a bullish order block. And the moment you get the displacement to the upside, now you can start looking for retracements and take trend trades. So that's timings, behavior, price, level. It all adds up. Boom. Voilà. Now price creates a fair value gap over here. Price retraces back into here and it pumps, right? Very, very straightforward. And I know that there are relatively equal lows here. I know if you only rely on price action concepts, you might think that price will— this is just a false sort of pump and price will come stop you out if you go long and place your stop loss underneath these lows. But how do I know? How do I increase my probability? I never truly know per se, but the probability is increased by a lot once you add these 3 factors into play. And once you add them into play, well, you— well, let's just say that this lesson, this video that you're watching here alone, can easily just double your win rate if you start applying these concepts and start practicing. And just, you know, one, one final example just to hammer the point home. It's actually going to be pretty, pretty quick because this was a very clean example and a very good representation on basically the setup. Now you can remember that on Bitcoin we saw a similar setup where at 2 AM you sweep the candle body lows and then price Again, levels, timings, 2 AM. You have a displacement towards the upside, retrace, and off you go. Okay, now for this reversal after a buy-side liquidity sweep, this also happens to be the high of the week, right? If you look at the chart, there is no high. Like, this is pretty much the high of the week right here. And the moment that you sweep the buy-side liquidity, how do you know that this is the top? Well, you look at timing, level, behavior of price. Level, that is the previous week's— sorry, the current week's high. And then timing, 9:30 AM. That's when the New York equity markets open, which is— well, we're looking at the NASDAQ, so 9:30 is a very significant time. And then behavior of price, what happens in the next half an hour? Well, you get this big candle, and then, you know, you can just start riding the price down. Now, in fact, if we actually go into a 1-minute chart, you will see this much, much clearer. So timing, level, the moment you get this, you can actually start entering. Of course, you would be stopped out if you placed your stop right above this high. You would get stopped out here, but still, it's still within the timing window. And the moment you see the displacement happen, well, that's your fair value gap right there. Retracement, you take your short here, place your stop above here, and off you go. So going back to a final example is right here where you have a fair value gap, fair value gap right there. Now notice how price comes very close to the fair value gap at what time? 1 AM, right? This is to trick traders into thinking that, oh, the fair value gap must have been filled already because it's not going down anymore. Well, in reality, you always wait for your what timing window? 2:30 AM. That's your first hour of the London open. The moment you get that, that's your fair value gap right there. Behavior price. What does price do? Well, you get a displacement. Voilà. That is your cue that you can take this trade. Now, I know that price retraces back into this order, this fair value gap right here, which is why you, which is why you never move your stop loss to break even too early. If you place your stop loss beneath the fair value gap, this would have been a proper fair value gap trade and If you took that, you know, for example, and you used a time-based exit, well, let's just say that you'd be up by quite a number of profit. That's about a 13-hour trade. And yeah, like, I can go on and on and on and on. Over here I have more examples as well, but you get the point. Timings, levels, behavior of price— that's how you increase your accuracy when it comes to trading. Now, if you liked what you saw from this video, I actually send an email containing actionable tips Just like what's in this video to all of my followers to help improve their trading. If you would like to also receive those emails, head over to the link in the description box below. It's absolutely free, and every single day I'm sending you top-tier alpha on how to improve your trading. But otherwise, if you have any questions, please ask it in the comment section below. I try my best to read all of my comments. And like the video if you enjoyed it. See you guys in the next one. Bye-bye. Bye-bye.