What is a Liquidity Grab?
💡 Definition
A Liquidity Grab (also called a Stop Hunt or Liquidity Sweep) occurs when Smart Money intentionally pushes price beyond key levels where retail traders have placed their stop losses and pending orders. Once this liquidity is "grabbed," price quickly reverses in the true intended direction, leaving retail traders trapped on the wrong side.
In Smart Money Concepts (SMC), liquidity grabs are one of the most powerful tools institutions use to fill their large orders. Understanding where liquidity sits and how it gets grabbed is essential for avoiding traps and finding high-probability entry points.
Visual Representation
Bullish Liquidity Grab Example
Price sweeps below support to grab liquidity (stop losses), then reverses strongly in the intended direction
Types of Liquidity Grabs
🔴 Buy-Side Liquidity Grab
Price sweeps above resistance, equal highs, or previous swing highs to grab buy stops and pending long orders. After grabbing this liquidity, price reverses downward. This traps breakout buyers at the top.
🟢 Sell-Side Liquidity Grab
Price sweeps below support, equal lows, or previous swing lows to grab sell stops and pending short orders. After grabbing this liquidity, price reverses upward. This traps breakout sellers at the bottom.
🟣 Double Liquidity Grab
Price sweeps liquidity on both sides before making the true directional move. This creates maximum confusion and traps traders on both sides, providing even more liquidity for institutions.
Where Liquidity Pools Form
Key Liquidity Zones to Watch
- Equal Highs/Lows: Multiple swing points at the same level create obvious stop placement zones
- Previous Swing Points: Highs and lows where traders place protective stops
- Round Numbers: Psychological levels like 1.1000, 50.00, 2000 where orders cluster
- Daily/Weekly/Monthly Highs & Lows: Significant timeframe extremes hold major liquidity
- Trendlines: Diagonal levels where breakout traders place orders
- Support & Resistance Levels: Obvious technical levels retail traders watch
- Fibonacci Levels: Common retracement levels (especially 50% and 61.8%)
- Moving Averages: Popular MAs like 50, 100, 200 where stops cluster
The Psychology Behind Liquidity Grabs
How Smart Money Engineers Liquidity Grabs
Step 1: Identify Liquidity Pools
Institutions know exactly where retail traders place stops and pending orders. They can see the order book depth and plan accordingly.
Step 2: Build Position Slowly
Smart Money accumulates positions quietly, creating ranging or consolidating price action to avoid showing their hand.
Step 3: Engineer the Sweep
They push price just far enough to trigger stops and pending orders, providing the liquidity needed to fill their massive positions.
Step 4: Reverse Aggressively
Once liquidity is grabbed, they reverse price in their true intended direction, often creating FVGs and strong impulsive moves.
Step 5: Trap Retail Traders
Breakout traders who entered during the sweep are now stuck in losing positions, providing additional liquidity as they exit with losses.
How to Trade Liquidity Grabs
- Mark Liquidity Zones: Identify and mark all equal highs/lows and key swing points on your charts
- Wait for the Sweep: Be patient - don't enter before liquidity is grabbed, let the trap spring first
- Confirm the Reversal: Look for strong rejection wicks, engulfing candles, or BOS in the opposite direction
- Enter on Retest: After the grab and reversal, wait for price to return to the Order Block or FVG created during the sweep
- Stop Placement: Place stops just beyond the liquidity grab wick, giving room for additional sweeps
- Multiple Timeframes: Higher timeframe liquidity grabs are more significant and reliable
- Volume Confirmation: Look for increased volume on the sweep and reversal candles
- Combine with Structure: Best liquidity grabs occur after CHoCH or at major structural levels
Why Liquidity Grabs Work
Liquidity is the fuel that drives markets. Institutions need massive amounts of liquidity to enter and exit their positions without moving price against themselves. By engineering liquidity grabs, they accomplish multiple objectives:
✦ Fill large positions at favorable prices by tapping into stop losses
✦ Create volatility and confusion to disguise their true intentions
✦ Trap retail traders on the wrong side, creating additional liquidity
✦ Test key levels before committing to directional moves
✦ Clear out weak hands before the true move begins
Understanding this manipulation allows you to avoid being the liquidity and instead position yourself to trade with the smart money flow.
Common Liquidity Grab Patterns
- Asian Session Grab: Liquidity sweep during low-volume Asian session, reversal during London/NY
- Pre-News Grab: Sweep liquidity just before major news releases to fuel the true directional move
- Triple Tap Pattern: Price tests the same level 3 times before finally breaking through on the 4th attempt
- V-Shaped Reversal: Sharp grab and immediate reversal creating a distinctive V pattern on the chart
- Failed Breakout: Price breaks key level, grabs liquidity, then immediately returns inside the range
- Accumulation/Distribution Grabs: Multiple small grabs during ranging periods before the real move
Avoiding the Trap
🚨 Don't Be the Liquidity!
Most retail traders lose money because they ARE the liquidity being grabbed. Here's how to avoid being trapped:
- Never place stops at obvious levels (equal highs/lows, round numbers, trendlines)
- Don't chase breakouts - wait for retests and confirmations
- Avoid trading during low liquidity sessions when sweeps are more likely
- Use wide stops beyond liquidity zones or tight stops based on Order Blocks
- Be suspicious of "too obvious" setups - if everyone sees it, it's likely a trap
- Wait for price to show its hand before entering positions
- Remember: The best trades often feel uncomfortable at entry
Real-World Example
Imagine a support level at 1.1000 with multiple tests creating equal lows. Retail traders place stop losses just below at 1.0990-1.0995, while breakout sellers have pending short orders at the same levels.
Smart Money sees millions of dollars in orders sitting below 1.1000. They push price down to 1.0985, triggering all these stops and orders, then immediately buy aggressively. This:
• Gives them the liquidity to fill their large buy orders
• Traps breakout sellers in losing short positions
• Stops out long holders who placed "obvious" stops
• Creates a strong reversal setup as trapped traders exit
The savvy SMC trader waits for this grab, then enters long on the retest of the Order Block created at 1.0985-1.1000, with stops below the sweep.