Liquidity: Where Stops Cluster

The core insight

Large orders need counterparties. To buy heavily without moving the market away, big participants need places where many sell orders rest — and vice versa. Resting orders cluster predictably: stops accumulate just beyond obvious levels. Above equal highs sit the stops of short sellers and breakout buy orders; below equal highs — nothing comparable. In SMC language, those clusters are liquidity pools.

The liquidity sweep

A recurring pattern follows: price spikes through an obvious level (triggering the clustered stops), trades there briefly, then reverses hard. SMC calls this a sweep or stop hunt; classical traders call it a false breakout or spring. Whatever the name and whoever the cause, the pattern is observable: obvious levels often get violated before the real move begins.