Liquidity Run Or Liquidity Sweep ( Purge Or Bos )

Summary

This video lesson focuses on understanding liquidity sweeps and stop hunts in trading, emphasizing how to identify whether price will continue in a trend or reverse. Key concepts include recognizing market structure, identifying bullish and bearish trends, and spotting stop hunts at swing highs and lows. The lesson guides traders through using supply and demand zones and break of structure signals to predict price movement. It teaches how to avoid traps and capitalize on market trends by anticipating liquidity sweeps and continuation patterns, helping traders make more informed decisions in both bullish and bearish market conditions.

Takeaways

• 😀 Identifying the trend (bullish or bearish) is crucial before determining whether price will continue in the same direction or form a reversal (stop hunt).
• 😀 A **liquidity run** happens when price continues in the same direction after crossing a swing point, whereas a **stop hunt** occurs when price traps traders by reversing.
• 😀 In a **bullish market**, swing lows are typically targeted for stop hunts, while in a **bearish market**, swing highs are the focus for stop hunts.
• 😀 Price reactions from **discount levels** (lower prices) usually lead to liquidity runs (continuations), whereas price reactions from **premium levels** (higher prices) often result in stop hunts.
• 😀 In an uptrend, if price breaks below a swing low, it’s likely a stop hunt, and price will continue upward after trapping traders.
• 😀 In a downtrend, if price breaks above a swing high, it’s likely a stop hunt, and price will continue downward after trapping traders.
• 😀 **Supply and demand cycles** play an essential role in understanding whether price will continue or reverse, especially when price reaches extreme discount or premium levels.
• 😀 Even if the market changes direction (e.g., from bullish to bearish), price often revisits previous levels to capture internal liquidity before fully shifting trends.
• 😀 Always confirm trade entries on **lower timeframes** for more precision, using **range formations** and key levels as indicators.
• 😀 Traders should avoid selling into a breakout in a bullish trend or buying into a breakout in a bearish trend, as price may stop hunt and reverse in both cases.
• 😀 When trading, mark significant levels like swing highs and lows, rejection zones, and structure breaks to guide entry and exit decisions effectively.

Q & A

What is the primary focus of this lesson?

The primary focus of the lesson is to help traders understand whether price action will continue in the current direction (liquidity run) or reverse (liquidity sweep or stop hunt) based on the market's trend and liquidity levels.

What is the difference between a liquidity run and a stop hunt?

A liquidity run occurs when price continues in the direction of the trend, while a stop hunt happens when price temporarily reverses to trap traders before continuing in the trend's direction.

How do trends influence trading decisions in this lesson?

Trends play a crucial role in trading decisions. In a bullish market, swing lows are expected to be stop hunt targets, whereas in a bearish market, swing highs become stop hunt targets.

What role does liquidity play in this strategy?

Liquidity is crucial as it determines the points where price may reverse to trap traders. The lesson focuses on how price moves around areas with accumulated liquidity and how traders can anticipate these movements.

What should traders focus on when trading in a bullish market?

In a bullish market, traders should focus on identifying swing lows as potential stop hunt targets, expecting price to briefly dip below these levels before continuing upwards.

What should traders look for in a bearish market?

In a bearish market, traders should focus on swing highs as potential stop hunt targets, anticipating a temporary reversal before the price continues to move lower.

How does understanding market structure help traders avoid traps?

Understanding market structure allows traders to identify potential reversal points, such as stop hunts, and avoid being trapped by false breakouts. By recognizing these key levels, traders can stay aligned with the prevailing trend.

What is the significance of the discount and premium levels in this lesson?

Discount and premium levels are used to identify areas where price may either continue (liquidity run) or reverse (stop hunt). Discount levels are lower, where price is expected to continue in a bullish market, and premium levels are higher, where stop hunts are more likely to occur.

How can traders manage risk when using this strategy?

Traders can manage risk by setting stop-loss orders at logical points, such as just above swing highs or below swing lows. They should also focus on trading within the direction of the dominant trend to increase the likelihood of success.

How do you trade a stop hunt in a bullish trend?

In a bullish trend, a stop hunt occurs when price dips below a swing low, trapping sellers. Traders can enter long positions after the stop hunt, expecting price to continue upwards in line with the bullish trend.