1. Liquidity Sweep + Engulfing
A spike through obvious highs or lows that fails, confirmed by an engulfing candle.
2.What it is
Equal highs, equal lows and obvious swing points hold many stop orders. When price spikes through such a level and then closes back inside the range with an engulfing candle, it can mean the stops were taken and the move has failed. You trade the reversal with the stop beyond the sweep.
In simple words
Everyone puts their stops in the same obvious places. Sometimes price pokes through, grabs those stops and snaps back. We wait for a strong candle that proves the snap-back, then trade in the new direction.
3.Why it may work
Clusters of stop orders are a source of liquidity for larger orders. After that liquidity is used, the push that caused the spike may disappear, and price can reverse. The engulfing candle is the evidence that buyers or sellers have taken over. It does not always work: some spikes are real breakouts.
4.Best market conditions
- Equal highs/lows or an obvious swing level
- A quick spike beyond it that closes back inside
- A strong engulfing candle right after
- The sweep happens at a meaningful level or session high/low
5.When NOT to trade it
- Price keeps closing beyond the level (a real breakout)
- There is no clear level that attracted stops
- The engulfing candle is huge so the stop would be too far
- You are fighting a strong higher-timeframe trend
6.Timeframes
Entry: 15M, 5M · Context: 1H
Mark equal highs/lows on the 1H chart and trade the reaction on the 15M or 5M chart.
7.Entry rules and step-by-step setup
Entry rules
- A sweep of a marked level
- A close back inside the range
- An engulfing candle in the reversal direction
Step by step
- 1.Mark equal highs or lows and obvious swing points
- 2.Wait for a wick through the level
- 3.Wait for the candle to close back inside the range
- 4.Look for a bullish (at lows) or bearish (at highs) engulfing candle
- 5.Enter after the engulfing close; stop beyond the extreme of the sweep
- 6.Target the opposite side of the range or a 1:2 multiple
8.Stop loss
Beyond the extreme of the sweep wick. If price makes a new extreme, the sweep idea has failed.
9.Take profit
The other side of the range, the next liquidity pool, or a fixed 2R.
10.Risk / reward
At least 1:2. Reversals from a sweep often offer 1:3 or more when the range is wide, but verify before you trade.
11.Confirmation
- The close back inside the range
- The engulfing candle's body covers the previous candle
- A structure shift on a lower timeframe
12.Invalidation
- A new extreme beyond the sweep wick
- Price closes beyond the level again after the engulfing candle
13.Common mistakes
- Entering during the spike before the candle closes
- Calling every wick a sweep
- Placing the stop inside the sweep wick
- Ignoring the trend
14.Example chart
How it performed in our own backtests
TESTINGBacktested on 2672 trades but not verified: 6 of 9 checks not met (win rate above 50%; profit factor at least).
- Win rate
- 33.1%
- Sample size
- 2672 trades
- Average planned RR
- 1:2
- Profit factor
- 0.85
- Worst max drawdown
- 81.6%
- Average per trade
- -0.109R
- Tested timeframes
- 15m, 30m, 5m
- Tested markets
- BTCUSDT, ETHUSDT, SOLUSDT
Period 2026-03-09 to 2026-10-03 · OKX spot candles (real exchange history, closed candles only) · engine bahari-bt-1.0.0 · run on 2026-10-03 · 1% risk per trade, 0.05R extra cost per trade plus spread · one position at a time, ambiguous candles resolved stop-first · parameters fixed before running.
A liquidity sweep followed by an engulfing candle, stop beyond the sweep extreme, 1:2 target.
VERIFIED checklist
- ✔Sample size of at least 300 trades(2672 trades)
- ✘Win rate above 50%(33.1%)
- ✘Profit factor at least 1.2(0.85)
- ✘Average result per trade above 0.05R after costs(-0.109R)
- ✘Worst max drawdown at most 25%(81.6%)
- ✔Average planned reward:risk at least 1:1(1:2)
- ✔Tested in at least 4 market/timeframe conditions (2+ markets, 2+ timeframes)(9 conditions, 3 markets, 3 timeframes)
- ✘Profitable in at least 67% of the conditions(1 of 9)
- ✘Profitable in BOTH halves of the history (profit factor at least 1 in each)(first 0.83, second 0.87)
Results per market and timeframe (9 runs)
| Market | TF | Trades | Win rate | Total R | Max DD |
|---|---|---|---|---|---|
| BTCUSDT | 15m | 346 | 32.1% | -54.0 | 45.49% |
| BTCUSDT | 5m | 173 | 38.7% | 2.1 | 18.43% |
| BTCUSDT | 30m | 424 | 24.1% | -158.3 | 81.58% |
| ETHUSDT | 15m | 290 | 34.5% | -16.0 | 26.84% |
| ETHUSDT | 5m | 169 | 34.9% | -16.3 | 37.3% |
| ETHUSDT | 30m | 317 | 36% | -0.4 | 25.32% |
| SOLUSDT | 15m | 362 | 34.8% | -18.4 | 38.09% |
| SOLUSDT | 5m | 174 | 36.8% | -2.2 | 13.74% |
| SOLUSDT | 30m | 417 | 33.8% | -28.5 | 43.32% |
Reading this honestly: VERIFIED needs 300+ trades, a win rate above 50%, profit factor 1.2+, drawdown under 25%, profit in at least two thirds of the conditions and in both halves of the history. A strategy that fails here can still be worth learning, but do not risk money on it before testing it yourself in the Strategy Lab.
Past and backtested results never guarantee future results. Nothing on this page is financial advice.
15.Quiz
16.Practical challenge
Find a sweep and an engulfing candle in a challenge and decide whether it is a valid reversal.