Liquidity Sweep Reversals with ATR Confirmation and Timed Exits

Summary

This bidirectional reversal method looks for price to breach a recent high or low, then requires a strong candle in the opposite direction before signaling a trade. The reversal candle must exceed a threshold based on the 14-period ATR. A breach below a prior low followed by a strong bullish candle triggers a long signal; a breach above a prior high followed by a strong bearish candle triggers a short signal. The described setup uses a 20-period lookback by default.

Exits combine percentage-based profit and loss levels with a time-based holding limit, whose default is five bars. The source and settings explain the rules and provide a long historical backtest window, but no performance metrics or validation results are reported. Risks include false sweeps, sensitivity to lookback and ATR settings, and fixed percentage exits that may not suit changing volatility. The document also notes that timed exits can cut off a developing move and that strongly trending conditions may challenge this countertrend approach.

Key ideas

• A recent high or low breach is treated as a possible liquidity sweep.
• The strategy waits for an opposite-direction candle whose size exceeds an ATR-based threshold.
• Long and short signals use mirrored sweep-and-reversal conditions.
• Exits combine percentage targets and stops with a maximum holding period.
• The document provides rules and a backtest window but no reported performance evidence.

Tags

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