Liquidity Sweep and Wick Reversal Signals with RSI and Fixed-Risk Sizing

Summary

This strategy looks for a long setup when a dragonfly-style doji makes a new low relative to the preceding 50 bars and the current RSI exceeds its lowest value over that lookback. The short setup mirrors this logic: a gravestone-style doji makes a new high while RSI remains below its prior lookback high. Candle-body and wick thresholds define the doji patterns. The proposed stop is placed at the signal candle’s low for longs or high for shorts, while a configurable risk-to-reward multiple sets the profit target. Quantity is calculated from the distance between the close and stop to target a stated dollar risk per trade.

The document describes signal rules and example parameter defaults but provides no backtest results. Its RSI conditions compare current RSI with an extreme from the prior lookback; they do not pair identified RSI swing lows or highs with corresponding price pivots, so the labels imply a broader notion of divergence than the code tests. The sizing formula also assumes the close as entry, while actual fills can differ, so realized risk may depart from the target, before fees, slippage, or other execution effects.

Key ideas

• The long setup combines a dragonfly-style doji, a low below the prior lookback minimum, and RSI above its prior lookback minimum.
• The short setup mirrors the long conditions with a gravestone-style doji, a new lookback high, and RSI below its prior lookback maximum.
• Stops use the signal candle’s extreme, and targets scale the stop distance by a configurable reward multiple.
• Position quantity is estimated from the distance between the close and stop to target a fixed dollar risk.
• The RSI test does not compare paired price and RSI pivots, and the document supplies no backtest evidence.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.