Liquidity Sweep Reversals with CHoCH Signals and ATR Risk Levels

Summary

This contrarian strategy looks for a break of a recent high or low followed by a simple candle reversal condition. A low sweep followed by a bullish close above the prior close creates a long signal; a high sweep followed by a bearish close creates a short signal. The document calls these conditions CHoCH signals. It sets stop distance at 1.5 times ATR and uses a configurable risk-reward multiple to place the target, while specifying a per-trade equity risk percentage.

The published test configuration covers ETH/USDT futures on daily bars over about a year, but the document provides no returns, drawdowns, or trade counts. The source calculates a risk amount from account equity but does not use that variable to derive order size, so the stated one-percent risk limit is not established by the shown sizing logic. The discussion notes false sweeps, volatility-driven stop distances, parameter sensitivity, and loss streaks as risks, and proposes adding confirmation, trend or time filters, and adaptive exits.

Key ideas

• The strategy identifies recent high or low breaks as potential liquidity sweeps.
• A reversal candle condition after the sweep defines long or short CHoCH entries.
• Stops are based on 1.5 times ATR, with targets set by a risk-reward multiple.
• Backtest settings are given without performance results, and the shown source does not connect its calculated risk amount to position sizing.

Tags

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