A liquidity sweep is a price move that trades through an obvious prior high or low — where stop-loss and breakout orders cluster — and then reverses, closing back inside the old range. The mechanical reading most rule-based systems use: a wick pierces the prior swing level, but the candle closes back on the original side of it.
The logic is order-flow folk wisdom with a real kernel: resting stops above highs and below lows are liquidity, and fast moves into those pools can fill large orders before price snaps back. Swept highs followed by rejection are read as failed breakouts and traded as reversals — the same event a breakout trader experiences as a losing trade.
Definitions vary in the discretionary versions: how far the wick must travel, whether the close must return inside, and which swing counts as “liquidity” differ by teacher, so backtests of one sweep rule do not validate another.