What best describes a liquidity sweep in markets?

What best describes a liquidity sweep in markets?

• A. A form of price pattern indicating reversal only in ranging markets.
• B. A measure of market volatility.
• C. Liquidity sweep is when institutions sweep resting orders to fill their own orders, often changing trend.
• D. A type of order that never executes.

Answer: (C)

Liquidity sweep is when a large participant rapidly consumes resting limit orders across multiple price levels to fill their own big order. This aggressive flow removes liquidity from the order book, often pushing the price quickly in the direction of the order and potentially triggering further moves or a shift in trend as other traders react. It’s not about a price pattern, a volatility metric, or an order that never executes; it’s about the actionable action of sweeping through available liquidity to get a large fill, which can amplify price moves and change the market direction.

Liquidity sweep is when a large participant rapidly consumes resting limit orders across multiple price levels to fill their own big order. This aggressive flow removes liquidity from the order book, often pushing the price quickly in the direction of the order and potentially triggering further moves or a shift in trend as other traders react. It’s not about a price pattern, a volatility metric, or an order that never executes; it’s about the actionable action of sweeping through available liquidity to get a large fill, which can amplify price moves and change the market direction.