Pattern 17 of 18: all patterns
Liquidity sweep and fair value gap
Price trades through a well-known swing low (where stop orders sit), then closes back above it. The move up leaves a three-candle gap (a fair value gap). A return into that gap is the setup. The short version is the mirror image above a swing high.
Obvious highs and lows collect stop orders. A sweep fills those orders and, if price closes back inside, shows the break did not attract follow-through. The gap marks where price moved too fast for both sides to trade.
- A confirmed swing low (ten bars each side). A candle trades below it and closes back above it. A close below is a break, not a sweep.
- The first three-candle gap after the sweep in the new direction, at least a tenth of an ATR wide.
- Entry at the middle of the gap. The setup expires if price runs away for 30 bars or closes through the far side of the gap.
How the alerts work for this pattern
- 1Forming
The sweep: the level was taken and the candle closed back.
- 2Complete
The gap formed. Entry, stop and target are known.
- 4Time to act
Price returns to the middle of the gap.
- xCancelled
The gap closed through, the setup expired, the session ended, or a new sweep replaced it.
The textbook trade
- Trigger
- A fill at the middle of the gap.
- Stop
- Beyond the sweep extreme by half an ATR.
- Target
- Two times the risk (2R).
Things to watch
- Not every sweep returns to its gap. Many setups expire without a fill.
- Sweeps of daily highs and lows get more attention from traders than sweeps of small intraday swings.
The idea of a false break that traps traders is described by Linda Bradford Raschke and Laurence Connors as "Turtle Soup" in Street Smarts (1995), and earlier by Richard D. Wyckoff as the spring and the upthrust. Fair value gaps and liquidity sweeps as named here come from the Inner Circle Trader material (2010s).
On our charts
Real detections by the scanner on our own price data (2026-08-01 to 2026-10-19), with the alerts it sent. Times are New York time. Some worked and some did not.
- 1Forming2026-10-19 14:00 NYtook the liquidity at 99.35 and closed back
- 2Complete2026-10-19 14:45 NYa fair value gap 98.42 to 98.89; a limit at 98.66
- 4Time to act2026-10-19 21:15 NYfilled at 98.66, stop 99.76, target 96.44
- 5Result2026-10-19 23:00 NYtime
- 1Forming2026-10-19 14:00 NYtook the liquidity at 25197.5 and closed back
- 2Complete2026-10-19 17:00 NYa fair value gap 25198.3 to 25201.9; a limit at 25200.1
- 4Time to act2026-10-19 20:30 NYfilled at 25200.1, stop 25177.9, target 25244.5
- 5Result2026-10-19 20:30 NYstop
Education, not advice. A pattern describes what many traders watch for; it does not predict what price will do. The textbook stop and target are reference levels, not instructions. Trading involves risk.
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Trading involves risk. This page is education, not advice; examples come from past data.
