Stop Hunting 101: How Swing Highs and Lows Become Liquidity Traps

Categories:

ProviderNews

Platforms

Tags:

ACY Securities - Jasper Osita

Aug 26, 2025

If you’ve ever been stopped out of a trade just before price reverses in your original direction, you’ve likely experienced a stop hunt. It’s one of the most frustrating feelings for traders - but for institutions, it’s a necessary part of how markets move. To trade like smart money, you need to understand how swing highs and swing lows act as liquidity magnets and why they are prime hunting grounds.

How Swing Points Form

Swing highs and swing lows aren’t random - they’re the natural footprints of buyers and sellers competing for control.

Swing High: forms when price pushes upward, stalls, and then fails to continue higher. Sellers step in stronger than buyers, leaving a visible peak. On a chart, you’ll notice a candle with higher highs flanked by two lower highs on either side.
Swing Low: forms when price drives downward, stalls, and then fails to push lower. Buyers overpower sellers, creating a trough. On a chart, it’s a candle with lower lows surrounded by two higher lows.

In simple terms, swings represent the turning points of momentum. They’re where one side (buyers or sellers) temporarily wins, but the other side quickly fights back.

These turning points catch traders’ attention:

Breakout traders watch swing highs/lows for entry triggers.
Retail stop-loss orders cluster just beyond them.
Smart money sees them as pools of liquidity waiting to be tapped.

That’s why swings are so important - not just as structure markers, but as maps showing where money is parked in the market.

A Visual Analogy: Waves on the Shore

Imagine standing on the beach watching waves crash and retreat.

Each wave that rises and falls is like a swing high and swing low.
The crest of the wave is a swing high - the peak where the water reaches its maximum before falling back.
The trough between waves is a swing low - the lowest point before the next surge of water pushes forward.

Just like the ocean, the market never moves in a straight line. It ebbs and flows, creating peaks and troughs that reveal where pressure builds and releases. Surfers wait for the best moment to ride the wave - not at the noisy crest where everyone’s crowded, but just after it breaks, when the true momentum carries them.

Institutions think the same way: they wait for traders to pile stops above the crest (swing high) or below the trough (swing low), then ride the momentum once liquidity is taken.

Why Swing Points Attract Stop Hunts

Markets move in swings - upswings and downswings. At the edges of these swings, traders naturally place their stops:

Above a swing high for shorts
Below a swing low for longs

These areas are like signposts showing where money is sitting. Institutions know that clustered stop losses = ready-made liquidity. That’s why price often spikes just beyond a recent swing high or low before reversing in the opposite direction.

Why Do Stop Hunts Happen?

A stop hunt is not the market “out to get you.” It’s the market doing what it must: collecting orders. Large players can’t enter positions in thin liquidity - they need volume, and swing points provide exactly that.

Think of it like a whale feeding. The whale doesn’t waste time chasing single fish. Instead, it drives a school of fish into a corner and then takes one big gulp. The “gulp” in the market is the sweep of swing highs or swing lows.

When Stop Hunts Usually Occur

Stop hunts often happen at key times:

Session Opens: The London open loves to sweep the Asian high/low. New York often hunts London’s extremes.
Before Major News: CPI, NFP, or rate decisions often see liquidity cleared before the real move.
At Obvious Swing Levels: Prior day/week/month highs and lows are classic hunting zones.
During Low Volume Windows: Thin liquidity sessions exaggerate stop runs.

The Most Common Stop Hunt Levels

The easiest way to anticipate stop hunts is to mark the most obvious swings:

Asian High & Low (8PM - 12NN EST) – London often raids these first.
London High & Low (3AM - 6AM EST) – New York likes to take them out.
Previous Day’s High & Low – Classic liquidity magnets.
Previous Week’s High & Low – A favorite for swing traders; hunts often happen early in the week.
Previous Month’s High & Low – Institutions target these for larger positioning.
Previous Quarter’s High & Low – For longer-term traders, these sweeps can spark major trend shifts.

Each of these levels is simply a swing high or swing low on a larger timeframe.

How to Recognize a Stop Hunt

To avoid mistaking a stop hunt for a breakout, look for:

Obvious Swing Highs/Lows – clusters of liquidity.
Sharp Spike Beyond the Swing – sudden movement that fails to follow through.
Fast Reversal (Displacement) – momentum back in the opposite direction.
Timing Alignment – session opens or news events often trigger the sweep.

How to Trade Stop Hunts

Instead of being the liquidity, wait for liquidity to be taken:

Mark prior session/week/month swing highs and lows.
Wait for price to sweep the swing.
Look for confirmation: a sideways in the lower timeframe - either price will breakout or fakeout.
Trade back in line with your higher timeframe bias.

This way, you move from being the hunted to trading with the hunters.

The Psychology of Stop Hunts

Stop hunts succeed because retail traders:

Place stops directly under obvious swing lows and above swing highs.
Chase breakouts without waiting for confirmation.
React emotionally to spikes, thinking they’ve “missed the move.”

By reframing swings as liquidity magnets, you can avoid being tricked into becoming part of the herd.

A Real-World Analogy

Think of a hunter tracking a deer. The hunter doesn’t charge straight at the deer from the front - that would scare it off instantly. Instead, the hunter circles, makes subtle movements, and sometimes even makes noise in one direction to lure the deer into exposing itself.

In the markets, the sweep of a swing high or low works the same way. Institutions engineer a false sense of direction, drawing retail traders in. Once the “deer” (liquidity) is flushed out of hiding, the real move begins in the opposite direction. Just as a skilled hunter knows where the deer will likely run, institutions know where liquidity sits - and they wait patiently to take it.

A Word of Caution: Not Every Swing Means Reversal

It’s important to remember that just because price takes a swing high or swing low, it doesn’t automatically mean the market will reverse. Many traders make the mistake of assuming “swing swept = reversal” and end up fading strong trends.

Here’s the reality:

Sometimes the sweep is just a continuation pattern, where the market clears liquidity and then keeps running in the same direction.
Strong momentum, aligned with higher timeframe bias, often means the break of a swing high or low isn’t a trap - it’s fuel for the trend.
A sweep without confirmation is just noise.

This is why confirmation is everything. Before you jump in, wait for:

A Market Structure Shift (MSS) showing rejection after the sweep.
A Fair Value Gap (FVG) entry aligned with displacement.
A clear higher timeframe draw on liquidity (HTF target) to trade toward.

Swing highs and lows are liquidity markers, not trading signals on their own. Treat them as clues in the story - then let confirmation write the ending.

Your Challenge

Mark yesterday’s swing high and swing low, plus the Asian session high and low. Watch how often price spikes these levels before reversing. Journal three examples this week, and you’ll start to see the stop hunt → reversal → real move sequence unfold in real time.

Start Practicing with Confidence - Risk-Free!

Open a free demo account today and experience institutional-grade spreads, lightning-fast execution, and all the tools you need to grow as a trader.

Trade forex, indices, gold, and more
Access ACY, MT4, MT5, & Copy Trading Platforms
Practice with zero risk

It’s time to go from theory to execution - risk-free.

Create an Account. Start Your Free Demo!

Check Out My Contents:

Follow me for more daily market insights!

Jasper Osita - LinkedIn - FXStreet - YouTube

This content may have been written by a third party. ACY makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplies by any third-party. This content is information only, and does not constitute financial, investment or other advice on which you can rely.

Comments

Sort By:

Latest

Loading Comments

Please Sign In or Create Your FREE Account to Comment.

LiquidityFinder

LiquidityFinder was created to take the friction out of the process of sourcing Business to Business (B2B) liquidity; to become the central reference point for liquidity in OTC electronic markets, and the means to access them. Our mission is to provide streamlined modern solutions and share valuable insight and knowledge that benefit our users.

If you would like to contribute to our website or wish to contact us, please click here or you can email us directly at press@liquidityfinder.com.

Stop Hunting 101: How Swing Highs and Lows Become Liquidity Traps

How Swing Points Form

A Visual Analogy: Waves on the Shore

Why Swing Points Attract Stop Hunts

Why Do Stop Hunts Happen?

When Stop Hunts Usually Occur

The Most Common Stop Hunt Levels

How to Recognize a Stop Hunt

How to Trade Stop Hunts

The Psychology of Stop Hunts

A Real-World Analogy

A Word of Caution: Not Every Swing Means Reversal

Your Challenge

Start Practicing with Confidence - Risk-Free!

Check Out My Contents:

Strategies That You Can Use

Indicators / Tools for Trading

How To Trade News

Learn How to Trade US Indices

How to Start Trading Gold

How to Trade Japanese Candlesticks

How to Start Day Trading

Learn how to navigate yourself in times of turmoil

Want to learn how to trade like the Smart Money?

Trading Psychology and Continuous Improvement Contents

Comments

Please Sign In or Create Your FREE Account to Comment.

LiquidityFinder

Featured Articles on Liquidity Finder

News Categories

Navigation

User Solutions

Company Solutions

Subscribe to Our Newsletter: