Liquidity Pool Trade

Entry Logic

• Entry trigger: Price sweeps a clear liquidity pool (e.g., equal highs/lows) and then reverses sharply.
• Confirmation: A high-volume reversal candle forms immediately after the liquidity sweep.
• Timeframe: 15-minute chart.
• Location context: The liquidity pool should be at a significant price level, visible on the 1-hour or 4-hour chart.
• Market condition: Ranging or trending, but with clear areas of liquidity to target.

Exit Logic

• Profit target: The opposing liquidity pool.
• Scaling out: Not recommended; aim for a single, high-R trade.
• Trailing stop: Trail the stop manually behind key swing points.
• Signal failure exit: Exit if price moves back beyond the swept liquidity level.
• Opposite signal exit: Exit if a new, opposing liquidity sweep setup forms.
• Time expiration: Exit if the trade is not profitable within the session.
• Momentum loss: Exit if the reversal momentum stalls.

Stop Loss Structure

• Hard stop: Just beyond the high/low of the reversal candle.
• Soft stop: A 15-minute close that invalidates the reversal.
• Max dollar loss: $180 per trade.
• Max percent loss: 0.9% of account.
• Structural stop: Beyond the furthest point of the liquidity sweep.

Risk Management Framework

• Risk per trade: 0.6% of account.
• Daily limit: 2 losing trades.
• Weekly limit: 3% drawdown.
• Max drawdown: 10%.
• R:R requirement: Minimum 3:1.

Position Sizing Model

• Sizing approach: Fixed risk per trade.
• Volatility adjustment: Tighter stop and smaller size if the sweep is very volatile.
• Conviction sizing: Use 100% of calculated size for A+ setups.
• Scaling in: Not recommended.
• Scaling out: Not recommended.

Trade Filtering

• Market conditions to avoid: Low-liquidity markets with no clear pools.
• Setups required: Obvious, untouched equal highs or lows.
• Instruments: Forex pairs and cryptocurrencies with prominent swing points.
• Time restrictions: Often occurs during session opens when liquidity is being engineered.
• Chop/news avoidance: Be cautious around news, as it can cause genuine breakouts, not just sweeps.

Context Framework

• Trend direction: Can be traded with or against the trend, as it is a specific pattern.
• VWAP relationship: The sweep often targets levels far from the VWAP.
• MA relationship: The reversal may find support/resistance at a key MA.
• Range location: At the highs or lows of a daily or weekly range.
• Higher TF alignment: The liquidity pool should be a significant feature on the higher timeframes.

Trade Management Rules

• Breakeven: Move stop to breakeven after a 2R move.
• Scale out: Not applicable.
• Add size: Not applicable.
• Fast vs slow moves: Expect a very fast reversal after the sweep.

Time Rules

• Optimal window: London and New York session opens.
• Times to avoid: Mid-day chop.
• Session notes: Look for sweeps of the previous day's high or low.

Setup Classification

• A+ criteria: A textbook sweep of clean, equal highs/lows with an immediate, high-volume reversal.
• A criteria: A clear sweep and reversal.
• B criteria: The sweep is messy, or the reversal is slow.
• C criteria: No clear liquidity pool to target.

Market Selection Criteria

• Instruments: EUR/USD, BTC-USD, ETH-USD.
• Volume: High volume on the reversal candle is critical.
• Volatility: High enough to create sharp sweeps and reversals.

Statistical Edge Metrics

• Win rate: 40%.
• Avg win: 5R.
• Avg loss: 1R.
• Profit factor: 2.0.
• Expectancy: 1.0R per trade.

Failure Conditions

• The sweep is not a sweep, but the beginning of a strong breakout.
• The reversal lacks momentum and price consolidates.

Psychological Rules

• Requires the ability to enter counter to the immediate, aggressive price action of the sweep.
• Must be able to take a loss quickly if the breakout is real.

Advanced Components

• Regime detection: This pattern often marks the end of a ranging regime and the start of a new trend.
• Filters: Use order flow tools to see where large orders are being filled during the sweep.
• Correlation: Check if correlated assets are also showing signs of a liquidity grab.
• MTF alignment: The target for the trade should be a logical level on the higher timeframes.

Location

• Strongest: At clearly defined, multi-touch highs or lows.
• Weakest: Against a very strong, established trend.