Internal vs. External Liquidity Sweeps in Trading

This, my friends, is not a good liquidity sweep.

If you think it is, you're going to enter into a short position above this high, and you're going to have your take profit set at the sell side below, only for price to continue higher and stop you out.

So let me show you how to find the right liquidity sweep so you can avoid losing thousands.

Here on the chart, we have three different pools of liquidity.

The liquidity resting within a range is known as our internal liquidity.

The liquidity resting outside of the range is known as our external liquidity.

We want to make sure we avoid using internal liquidity sweeps.

Instead, we want to focus on using external range liquidity sweeps to get high probability setups.

So let's play this out. When price swept the first pool of internal liquidity, we can see that we continued higher.

When price swept the second pool of internal liquidity, we can see the same thing happen.

Traders that shorted after both of these liquidity sweeps would have been stopped out.

Now let's see what happens when we use the external range liquidity sweep.

Price flushed lower after engaging with the ERL.

My Forever Model Rulebook, which I use every single morning, explains exactly which liquidity sweep to use.