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Strategy Playbooks
Smart Money · Intermediate

Liquidity Sweep Reversal

Buy the failed breakdown below equal lows.

Backtest this playbook
Origin: Stop-run and failed-breakout trading, formalised by Smart Money Concepts
Session
Any liquid session; best in London and New York
Timeframes
15m–1h
Markets
ES / MES, NQ / MNQ, Gold, Major FX pairs
Reward
2R fixed
Illustration
100.0102.0104.0Sell-side liquidity 100.0Stop 99.2Target 2R 102.8Sweep 99.3Long 100.4
Two lows at 100.0 and 100.05 form sell-side liquidity. The sweep bar trades to 99.3 and closes at 100.4, back above the level. Long at the next open (100.4), stop 99.2, 2R target 102.8 — reached four bars later.

Why it works

Equal lows and obvious swing lows attract sell stops. When price runs those stops but cannot hold below — closing back above the level — the sellers who chased the break are trapped, and their covering fuels the reversal.

The rules

01Setup

  • Find the lowest low of the last 20 bars — ideally equal lows that many traders can see.
  • A bar trades below that low but closes back above it.

02Entry

  • Enter long at the next bar’s open (mirror for buy-side sweeps).

03Stop

  • Just below the sweep wick, with a buffer of 0.1× ATR.

04Target

  • 2R. The opposite side of the range is a sensible discretionary alternative.

05Management

  • A reclaim filter helps: require the closing body to be at least a fraction of ATR.

06Invalidation

  • The next bar closes back below the swept level.

Common mistakes

  • Buying before the sweep candle closes back above the level
  • Placing the stop at the swept level instead of below the wick
  • Counting a breakdown that closed below the level as a sweep

Educational material, not financial advice. The illustration is a sketch of the rules, not a historical trade. Results in the backtester are hypothetical and do not guarantee future performance.