How to read Liquidity Sweep Zones: swings, liquidity levels, sweeps and fair value gaps

Liquidity Sweep Zones draws four things on the chart: swing points, the liquidity levels they leave behind, sweeps of those levels, and fair value gaps. Each one follows a written rule, so you can always check why it is there. This post explains the rules. I wrote the indicator, so read this as a manual from the author, not as a review.

Past example on XAUUSD M15. The arrows, lines and zones mark events that already happened. They are not a list of trades.

The four elements

Swing high and swing low. A swing high is a candle whose high is higher than the highs of the N candles on its left and not lower than the highs of the N candles on its right. A swing low is the mirror image. With the default N = 5 a swing is known only after five more candles have closed, so the indicator never marks a swing on the current candle.

Liquidity level. The price of a swing that has not been touched yet, drawn as a line that runs to the right. Red lines sit above the price (swing highs), green lines below it (swing lows). The common idea behind it is that stops and pending orders tend to sit just beyond obvious highs and lows. That is a market idea. The indicator does not prove it, it only marks where those prices are.

Sweep. A later candle goes beyond the level with its wick, and on the same candle or within the next two candles (the default) a candle closes back on the original side of the level. The arrow is placed on the candle that closes back: a red arrow above the candle for a sweep of a high, a green arrow below the candle for a sweep of a low. The level then stays on the chart as a dotted line, from the swing to the candle that closed back. If price goes through the level and does not close back in time, the level is simply dropped. That was a break, not a sweep.

Fair value gap. Three consecutive candles where the first and the third do not overlap: the space between them is the gap. A bullish gap is drawn in blue and a bearish one in purple, as an outline. It stays on the chart until a candle closes through it. Gaps smaller than half of the average candle range are ignored by default.

What the arrow says, and what it does not

The arrow says one thing: this level was taken and price closed back within the allowed candles. It does not say that price will reverse and it is not an entry. On a trending day price can sweep a level and keep going. Treat it as a map of where something already happened. Any trading rule built on top of it needs its own test on its own data.

The inputs that matter

• Swing strength (default 5): candles on each side of a swing. Lower values give more swings and more arrows, higher values give fewer and larger swings.
• Candles allowed to close back (default 2): a lower value rejects slower reversals.
• Minimum distance beyond the level (default 0 points): raise it to ignore wicks that barely touch the level.
• Minimum gap size (default 0.50 times the average candle range): raise it to keep only larger gaps.
• Open levels and open gaps shown (6 per side and 4 by default): they limit the clutter on the chart.
• Candles analysed (default 800): how far back it looks.
• Alerts: a popup on a new sweep, and optionally a push notification to the phone (you set your MetaQuotes ID in MT5). An alert fires only for a sweep that closed on the last candle, never for old ones.

Good to know

The indicator uses closed candles only and recalculates once for each new candle. It never opens or closes a trade. The history it draws depends on how many candles your terminal has loaded.

For developers: the two arrow plots are ordinary indicator buffers (0 for sweeps of highs, 1 for sweeps of lows). The levels and the gaps are chart objects, not buffers.

Where to find it

Liquidity Sweep Zones is on the MQL5 Market. The free edition, Liquidity Sweep Marks, has the swings, the levels and the sweeps, without the gaps and the alerts.

Not financial advice. Trading leveraged products carries a high risk of loss.

Liquidity Sweep Zones:

https://www.mql5.com/en/market/product/199723

Liquidity Sweep Marks (free):

https://www.mql5.com/en/market/product/199687