bigmaxo

How to trade a KLS Trading a Key Liquidity Sweep (KLS) requires patience, confirmation, and disciplined risk management like every other setup I take. Once you’ve identified a valid potential KLS, you don’t immediately enter the trade once the swing was swept. Instead, you wait for the market to retest that swing and look for confirmation on the *same timeframe* in which the swing occurred. So, if the swing took place on the daily chart (1D+), you wait for a daily candle, effectively confirming that the breakout or breakdown was false. This confirmation gives more reliability to the idea that the KLS will hold and price is likely to reverse from that point. My entry typically comes after this confirmation, and stop loss is ideally placed at the extreme end of the KLS swing, the high or low that swept liquidity. The logic here is simple: if the KLS is legitimate and respected, price should not revisit that peak. If it does, the KLS is likely to become unsuccessful and I’d want to be out of that trade. However, there are times when the original stop loss placement for the key liquidity level, remains untouched after the swing was cemented after the reversal played out. In these cases, I might consider adjusting stop loss to a slightly, more conservative level, especially if I’m being a bit more aggressive with confirmation (EX: using a 4H confirmation for a HTF KLS). For instance, if placing your stop at the KLS swing gives a 5R (risk-to-reward) setup, but moving it slightly wider to a respected level like a valid fibonacci extension, fair value gap (FVG), or the base of a pole only reduces your R/R by less than 1R, it may be worth the conservative stop if your entry is aggressive (I don’t prefer this & don’t recommended for inexperience). A more conservative and higher-probability approach to trading a KLS involves focusing not just on the sweep itself, but on the market structure that forms around it. Instead of immediately entering after confirmation of the KLS, you can wait for price action to stabilize and develop a clearer structure, momentum trading continuation setups through identifiable liquidity left behind inside the reversal. One effective method is to navigate into lower timeframes after a KLS has been confirmed. As price reverses, it will often leave behind supply & demand zones, imbalances & hidden liquidity. These become potential areas for refined entries used as continuation. In this case, you base your entry, stop loss, and position sizing on the lower-timeframe setup, not the KLS, allowing for tighter risk while your target can still be based on the original higher-timeframe KLS idea, which creates a "moonshot" R/R. Alternatively, if price enters a ranging phase after the KLS, especially on the lower timeframes, you can use the KLS as confluence for directional bias. Once the range stabilizes, you can aim for extended targets, using the higher-timeframe structure and KLS to justify a bigger move. A safer and more strategic way to trade KLS setups, giving the market time to prove its intention before you commit. It's a balanced approach that combines the power of higher-timeframe liquidity sweeps with the precision of lower-timeframe continuations.

(KLS): Key Liquidity Sweep 🧵 A concept I made combining @Moneytaur_ logic with smart money market structure principles. This specific educational piece is part of Dune Capital, but since there is no other resources, I'm deciding to publicize this section/concept for all to learn. “Whales like to take profit, where they have taken profit before” A Key Liquidity Sweep (KLS) occurs when price makes a sharp move to take out a significant high or low inside a mitigated key liquidity level, before reversing. These sweeps often mark the beginning of major reversals, particularly macro double tops and double bottoms. Unlike simple swing failure patterns (SFPs) from ICT concepts, which can sometimes be misleading if no real liquidity was taken, a true KLS requires that liquidity has actually been swept, meaning not retail stop orders, but institutional resting orders at that level that are unfilled. SFPs, on the other hand, are often just temporary manipulations, quick stop hunts followed by a retrace back into a key level before the trend continues, not a reversal. SFPs mean nothing, if there is no liquidity to be swept. A KLS is not a trap, it’s a purposeful move, engineered by market makers to refill remaining orders left behind at the key swing point. The more powerful the liquidity level that gets taken (for example, a optimal reversal level), the more powerful the KLS is likely to be and occur. These are the moments when major trend reversals often begin, marking macro double tops and bottoms. But identifying a true KLS goes beyond just spotting a reversal at a key level. The reversal must leave behind a structural footprint, either a break of structure (BOS) on the same timeframe, or at the very least, a meaningful market structure shift (MSS) on a slightly lower timeframe (ex: 12H BOS confirming a HTF reversal from that key liquidity level). Without that structural confirmation, what looks like a reversal may just be a temporary pullback before price continues in its original direction. Also study how much liquidity was taken during the original test of the key level: zoom into lower timeframes to inspect candle bodies, did they close within confirming mitigation of the level? How deep into the level do body closes go? These determine how much liquidity was taken from the reversal & how much potential institutional orders are remaining at the swing. If little to no lower TF bodies confirm the level, or less than 35% of the key level was taken, it’s likely a re-test of the level and not a KLS. Remember, the liquidity is within the swing, as it took it from the liquidity level. If that is not the case and there is still liquidity left within the key level to be taken, market makers are likely sending price to re-test the liquidity level or much lower to create a fresh new range. This is my own optimized version of ICT’s SFP I have created, after 3+ years of using this concept. A concept that forecasts future double bottoms and double tops before they occur, when identified correctly. Allowing you to buy/sell before powerful reversals.

Shall we let the games begin ? 🔜🍿