Market Maker Tactics: Trade With Smart Money, Not Against It
Stop being exit liquidity. Learn how market makers manipulate price, where they hunt stops, and how to trade alongside them instead of against them.
- Market makers need liquidity (your stops) to fill their large orders. They push price to grab it.
- Key tactics: stop hunts, liquidity grabs, spoofing, and pump & dumps. Learn to recognize each.
- Thrive detects manipulation patterns and alerts you when stop hunts and liquidity grabs occur.
See Manipulation Tactics in Action
Watch how each manipulation pattern unfolds step by step:
Price pushed below support to trigger stop losses
Obvious support level where traders place stops
Market makers pushed price below the obvious support at $67,000 to trigger retail stop losses. Once stops were hit (providing liquidity), they reversed and bought at the lows. The quick recovery above support confirms this was a stop hunt, not a real breakdown.
Place stops below the obvious level with extra buffer. Wait for the sweep to complete before entering. Enter on reclaim of the support level with stop below the sweep low.
Understanding Smart Money
"Smart money" refers to large, informed traders—market makers, hedge funds, and whales—who have capital advantages and information advantages. They can't simply buy or sell at market like retail traders. Their size requires them to accumulate and distribute positions strategically.
The core problem for smart money: they need liquidity. To buy 1000 BTC, they need sellers willing to sell 1000 BTC at their desired price. Retail stop losses provide this liquidity—when your stop is hit, your sell order becomes their buy order.
This is why manipulation exists: smart money engineers price moves to trigger retail orders, providing the liquidity they need to fill their positions. Once filled, they let price move in their intended direction.
Stop Hunts: The Most Common Manipulation
A stop hunt is when price is pushed beyond an obvious level to trigger stop-loss orders before reversing. It's the most common manipulation tactic because retail traders place stops at predictable locations.
Where Stops Cluster
- Below swing lows: The most obvious spot for long stops
- Above swing highs: Where short stops accumulate
- Round numbers: $60,000, $65,000—psychological levels attract stops
- Previous day's high/low: Key intraday levels
- Trendline touches: Technical traders place stops at trendlines
How to Trade Stop Hunts
- Identify the level: Where are stops obviously clustered?
- Wait for the sweep: Price breaks the level, triggering stops
- Watch for rejection: Quick reversal back above/below the level
- Enter on reclaim: Once price reclaims the level, enter in the reversal direction
- Stop beyond the sweep: Place your stop beyond the manipulation low/high
Liquidity Grabs: The Expanded Version
Liquidity grabs are similar to stop hunts but target any area with clustered orders—not just stops. This includes limit orders, liquidation levels, and option strike prices.
Example: BTC has strong resistance at $70,000 with many breakout buy stops above. Smart money spikes price to $70,200, triggering those buys. But instead of continuing higher, price immediately reverses. Those breakout buyers are now trapped longs—their buy orders gave smart money exit liquidity.
Key distinction from real breakouts: Real breakouts have follow-through. Liquidity grabs reverse immediately. If price breaks a level but doesn't hold for more than a few candles, it was probably a grab.
| Pattern | What Happens | How to Identify | How to Trade |
|---|---|---|---|
| Stop Hunt | Price sweeps stops and reverses | Quick wick through level, immediate rejection | Enter on reclaim of level |
| Liquidity Grab | Price grabs orders at key level | Breakout that immediately fails | Fade the failed breakout |
| Spoofing | Fake orders manipulate sentiment | Large orders that disappear | Don't trade order book alone |
| Pump & Dump | Coordinated pump then distribution | Vertical move on low cap, declining volume | Avoid or take profits very early |
Spoofing: Fake Order Book Manipulation
Spoofing is placing large orders with no intention of executing them. The goal is to create false impressions of supply or demand and influence other traders.
How Spoofing Works
- Place large order: A massive buy wall appears at $67,000
- Influence sentiment: Traders see "support" and buy, or don't sell
- Execute real trade: While others react to the fake wall, the spoofer executes their actual trade
- Cancel fake order: The wall disappears before ever being filled
How to Spot Spoofing
- Orders that move: The wall stays a fixed distance from price
- Instant cancellation: Order vanishes when price approaches
- No tape prints: Large order but minimal actual trades at that price
- Pattern repetition: Same size orders appearing/disappearing repeatedly
Rule: Never trade based solely on order book depth. Wait to see if orders actually get filled when price reaches them.
Fair Value Gaps: Smart Money Footprints
A Fair Value Gap (FVG) is an imbalance zone where price moved so aggressively that normal two-sided trading didn't occur. On a chart, it appears as a gap between candle wicks—the third candle's wick doesn't overlap the first candle's wick.
FVGs often form during smart money moves. When price returns to fill these gaps, it represents a high-probability entry zone.
Trading FVGs
- Bullish FVG: Gap above price. Price often returns to fill it before continuing down.
- Bearish FVG: Gap below price. Price often returns to fill it before continuing up.
- Entry strategy: Enter when price returns to the FVG with confluence (structure, order flow)
- Stop placement: Beyond the FVG—if it doesn't hold, the setup is invalid
Related: Order Flow Trading for more on reading smart money footprints.
How to Avoid Being Exit Liquidity
Exit liquidity is when your orders provide the fills smart money needs to exit their positions. You buy their sell, or sell their buy—at the worst possible time.
Signs You're Being Used as Exit Liquidity
- Chasing breakouts: You buy the breakout and it immediately reverses
- Stops at obvious levels: Your stop gets hit then price reverses
- Buying parabolic moves: You FOMO in near the top
- Selling panic lows: You capitulate at the exact bottom
How to Avoid It
- Don't place stops at obvious levels: Add buffer beyond swing points
- Wait for stop hunts to complete: Let them sweep, then enter on reversal
- Don't chase: If you missed the move, wait for the next setup
- Enter on retracements: Not on initial moves
- Verify breakouts: Wait for follow-through before trading breakouts
Trading With Smart Money
The goal isn't to predict manipulation—it's to trade the reversal after manipulation completes. You can't front-run smart money, but you can follow their footprints.
The Smart Money Trading Framework
- Identify liquidity zones: Where are stops clustered? Where will smart money hunt?
- Wait for the sweep: Don't anticipate—let price take the liquidity
- Look for rejection: Quick reversal, absorption, or structure break
- Enter on confirmation: Price reclaiming the level or breaking structure
- Manage risk: Stop beyond the sweep low/high
This approach means you miss the first part of the move, but you enter with confirmation that manipulation has completed. Higher probability, better risk/reward.
Common Mistakes
- Seeing manipulation everywhere: Not every move is manipulation. Real supply/demand exists.
- Front-running sweeps: Trying to predict where manipulation will occur. Just wait for it.
- Revenge trading after stops hit: Getting stopped is part of trading. Don't tilt.
- Ignoring context: Manipulation happens at key levels. Random mid-range moves are usually real.
- Over-leveraging: Even correct manipulation reads can have deep wicks. Size appropriately.
Frequently Asked Questions
What is a market maker in crypto?
Market makers provide liquidity by placing both buy and sell orders. They profit from the spread between bid and ask prices. In crypto, MMs include professional firms, exchanges, and whales who move markets. They need liquidity (your orders) to execute their large positions.
What is a stop hunt?
A stop hunt is when price is pushed beyond an obvious support/resistance level to trigger stop-loss orders. Market makers do this to accumulate liquidity (stopped-out traders' orders) before reversing. The sign: price breaks a level briefly, triggers stops, then immediately reverses.
What is a liquidity grab?
A liquidity grab is similar to a stop hunt—price moves to an area with clustered orders (stops, limit orders) to "grab" that liquidity. The market maker needs opposing orders to fill their large position. After grabbing liquidity, price reverses.
What is spoofing in crypto?
Spoofing is placing large orders with no intention of executing them. The goal is to create false impressions of supply/demand and manipulate other traders. Signs: large orders that disappear when price approaches, orders that constantly move away from price.
What is a fair value gap (FVG)?
A fair value gap is an imbalance zone where price moved so fast that normal two-sided trading didn't occur. It appears as a gap between candle wicks. Price often returns to fill FVGs. Smart money uses them as entry zones.
How do I avoid being exit liquidity?
Don't place stops at obvious levels (round numbers, recent lows/highs). Wait for stop hunts to complete before entering. Trade with the trend after manipulation completes, not before. If a breakout doesn't have follow-through, it's likely a grab.
How do I trade with market makers?
Identify where liquidity clusters (obvious stops), wait for price to sweep that liquidity, then enter in the opposite direction when price reclaims the level. You're trading the reversal after manipulation, not trying to predict the manipulation.
Are all price moves manipulation?
No. Real supply/demand drives most moves. But at key levels with clustered stops, manipulation is common. Learn to distinguish: manipulation has immediate reversal after the sweep. Real breakouts have follow-through volume and continuation.