Market Structure Shift (MSS) indicates an actual trend change by breaking through a resistance or support level. In contrast, Liquidity Grab is a false breakout designed to collect orders and continue moving in the previous trend direction.
Market Structure Shift (MSS)
When one of the highs is broken and the price starts forming higher highs (HH) and higher lows (HL), a Market Structure Shift (MSS) occurs. This event marks a transition in price movement from a downtrend to an uptrend or vice versa.
Key Features of Market Structure Shift
In MSS, swing highs and swing lows are broken, revealing specific characteristics in the ICT trading style that help predict price trends. Key features of Market Structure Shift (MSS):
- Breaking swing highs (Swing High) in a downtrend
- Breaking swing lows (Swing Low) in an uptrend
- Confirming trend reversal with the formation of new HH or LL
- Increasing price movement strength and liquidity volume
- A pullback to the broken level after breaking the price range
Steps to Identify Market Structure Shift
To recognize MSS, price movements must be analyzed in multiple stages across different timeframes. If confirmation is received at each step, the shift's validity is strengthened.
- Identifying the current market trend (examining highs and lows)
- Checking for a high or low break depending on the current trend
- Confirming the break level (formation of a high or low opposite to the previous trend)
- Assessing changes in price movement strength and liquidity volume
- Reviewing higher timeframes for further confirmation
- Checking for the possibility of a Liquidity Grab
What is a Liquidity Grab?
When the price breaks a low and moves past it but fails to sustain, a Liquidity Grab occurs. In such cases, a price reversal to an uptrend can be expected.
Key Features of Liquidity Grab
A Liquidity Grab occurs when a false breakout of support and resistance levels is observed. Characteristics of a Liquidity Grab:
- Mostly occurs near key support and resistance levels
- The price temporarily breaks the level but fails to hold above/below it
- Returns to the previous trend with greater strength and increased liquidity
- Designed to trigger stop losses of retail traders
- It’s More commonly seen in lower timeframes
How to Identify a Liquidity Grab?
Liquidity Grab occurs in three major areas of the market: Support, Resistance, and Stop-Loss Levels.
Retail traders often place sell orders around resistance levels and buy orders near support levels, with stop-losses positioned just beyond these zones.
- The market initially moves toward these levels and triggers orders;
- After activating the orders, the price continues moving toward retail traders' stop-losses;
- Once stop losses are triggered, the necessary liquidity for a major move is collected, and the main price movement begins.
Comparison of MSS and Liquidity Grab
MSS differs from a Liquidity Grab depending on the strength of the breakout and the change in market direction. Difference Between MSS and Liquidity Grab:
Parameters | Market Structure Shift (MSS) | Liquidity Grab |
Characteristics | A real price trend reversal | Liquidity collection for the main move |
Structure | Breaking the last High (H) or Low (L) and forming a new high or low in the opposite trend | False breakout |
Purpose | Identifying the overall trend | Recognizing corrections in the overall trend |
Timeframe | Mostly higher timeframes | Mostly lower timeframes |
Best Trading Style | Swing trading | Scalping |
Differences in Structure
In Market Structure Shift (MSS):
- The last high or low of the trend is broken with strong momentum, leading to a sudden surge in liquidity
- After the breakout, a pullback to the broken level is commonly seen
In Liquidity Grab:
- The breakout occurs with low momentum, and no significant increase in liquidity happens initially
- Once stop-losses are triggered, a sudden liquidity surge occurs, pushing the price back to the original trend
Timeframe Differences
- MSS is commonly seen in mid-term timeframes (15-minute and 30-minute charts), offering strong validity
- Liquidity Grab mostly appears in lower timeframes
Trading Styles
- Properly identifying MSS allows for swing trading opportunities
- Correctly detecting a Liquidity Grab is ideal for scalping
Why is Understanding the Difference Between MSS and Liquidity Grab Important?
Comparison of MSS and Liquidity Grab is crucial for traders to avoid misinterpretations. When the price approaches support or resistance and breaks through, a Liquidity Grab often occurs. However, retail traders may mistakenly interpret this as an MSS, leading to stop-loss activation.
Avoiding Entry Mistakes
In a Liquidity Grab, the price pierces support/resistance but fails to sustain, returning to its previous trend. The level is completely broken in an MSS, leading to a shift in trend. Confusing these two concepts can result in losing trades.
Optimizing Trade Entries & Exits
- Identifying MSS helps traders find strong entry points to profit from a complete trend reversal;
- Recognizing a Liquidity Grab prevents failed trades and helps spot short-term entries for quick profits.
Better Stop-Loss & Take-Profit Management
Institutions often use Liquidity Grabs to manipulate retail traders, triggering stop-losses to fuel their desired price move.
Understanding this allows traders to set stop-losses correctly and avoid stop-hunting.
MSS provides reliable breakout confirmation, helping in defining stop-loss and take-profit levels.
Conclusion
Comparison of Market Structure Shift and Liquidity Grab highlights the fundamental distinction between these two concepts. Market Structure Shift (MSS) is a significant trend change typically found in 15-minute and 30-minute timeframes. Identifying MSS helps traders find optimal entry points.
Liquidity Grab is a trap for retail traders. It collects stop-loss orders around support/resistance levels, allowing institutions to gain the necessary liquidity for a major move. This phenomenon is mostly observed in lower timeframes (1-minute and 5-minute charts).
