Liquidity vacuums after a stop run
Posted: Sat Oct 31, 2026 7:46 pm
A stop run is the sudden sweep through a level where many stops sit. What happens right after is more interesting than the sweep itself.
Once stops are triggered, the orders that were providing liquidity have been consumed. The book behind the move is thin. Price can overshoot because there is little to absorb the flow. Then, with the stops cleared, buyers or sellers often step in, and price snaps back.
That snap-back is the basis of several scalping approaches. Wait for the sweep, look for signs of exhaustion such as slowing ticks and a return of tight spreads, and fade the move with a stop beyond the extreme.
The risk is that some sweeps are the start of a real move. Fading them without confirmation means catching a falling knife.
A sensible compromise is to wait for price to reclaim the level that was broken. That costs part of the move, but it filters out the continuation cases.
What confirmation do you require before fading a sweep?
Once stops are triggered, the orders that were providing liquidity have been consumed. The book behind the move is thin. Price can overshoot because there is little to absorb the flow. Then, with the stops cleared, buyers or sellers often step in, and price snaps back.
That snap-back is the basis of several scalping approaches. Wait for the sweep, look for signs of exhaustion such as slowing ticks and a return of tight spreads, and fade the move with a stop beyond the extreme.
The risk is that some sweeps are the start of a real move. Fading them without confirmation means catching a falling knife.
A sensible compromise is to wait for price to reclaim the level that was broken. That costs part of the move, but it filters out the continuation cases.
What confirmation do you require before fading a sweep?