The Fake-Out Specialist
Liquidity Sweeps combined with Inversion Fair Value Gaps represent one of the cleanest ways to align with institutional execution logic. This strategy is built around a simple but powerful reality: large players cannot enter positions without liquidity, and retail traders conveniently place their stop losses in predictable locations.
The liquidity narrative is straightforward: retail traders place stops above equal highs and below equal lows. Institutions intentionally drive price into those areas to access resting orders. That stop-run creates the liquidity needed to enter or exit large positions efficiently.
The retail trap occurs when breakout traders enter immediately after price breaches a high or low, assuming continuation. Institutions fade that move almost instantly, reversing price and leaving retail traders trapped at the worst possible price.
This strategy works because it does not chase price. It waits for manipulation, confirms intent, and then enters where risk is smallest and probability is highest.
The defining trigger of this strategy is a liquidity sweep beyond a clearly defined swing high or low, immediately followed by aggressive displacement that creates an Inversion Fair Value Gap (IFVG).
The displacement candle is critical: it must move with speed, range expansion, and intent, showing that one side of the market has taken control.
The setup becomes actionable when price retraces back into the IFVG, typically the midpoint or upper/lower third of the gap depending on direction. This retracement is where institutional orders are commonly re-entered after the initial liquidity grab.
This setup typically delivers 1:2 to 1:4 risk-to-reward profiles. Stops are placed beyond the high or low that created the liquidity sweep. If price returns beyond that level, the premise of trapped traders and institutional reversal is invalidated.
Invalidation is clean and immediate. A candle close beyond the swept level means institutions did not defend the area.
Trade frequency is realistic and healthy: 2–4 high-quality setups per week per instrument, which aligns well with prop firm rules and mental sustainability.
The clearest explanations of this logic come from ICT teachings on liquidity and imbalance, especially breakdowns on Power of Three and Displacement + FVG mechanics.
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Firm's Note: The best IFVGs are created immediately after liquidity is taken, not random gaps formed mid-trend. Timing matters more than pattern recognition.
This is a base-hit strategy. It excels in evaluations because risk is tight, invalidation is obvious, and overtrading is naturally reduced.
During choppy markets, this strategy protects capital by simply not triggering. No liquidity sweep means no trade. That patience is what keeps funded accounts alive.