Volume and Liquidity Sweep Confirmation for RSI Exhaustion Reversals
Summary
This strategy looks for potential turning points by combining RSI extremes, above-average volume, and evidence of a recent low or high being swept and reclaimed. Bullish exhaustion requires RSI below 35, volume above 1.2 times its 20-bar average, and either a lower low or a downside liquidity sweep that closes back above the prior pool. Bearish exhaustion mirrors these conditions at the highs, with RSI above 65.
An exhaustion event opens a 12-candle window for confirmation. A long then requires price to cross above the prior high while RSI rises; a short requires a cross below the prior low while RSI falls. Entries are limited to flat positions, and an opposite exhaustion signal closes an open trade. The document includes a script but no backtest results or market-specific evaluation. The fixed thresholds and lookbacks may behave differently across instruments, and extreme readings can persist during strong trends, so the reversal premise is not assured.
Key ideas
- Bullish and bearish exhaustion require an RSI extreme, elevated volume, and evidence of a local price extension or liquidity sweep.
- A qualifying exhaustion event remains active for up to 12 candles while awaiting price and RSI confirmation.
- Long and short entries use a break of the previous candle’s high or low, respectively.
- An opposite exhaustion event closes an open position.
- The document gives no performance evidence, and reversal signals may fail during sustained trends.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.