Liquidity Sweep Plus CHoCH: A Combined Entry Model for Reversals

Reversal trading fails when traders front-run a turn that never comes. The sweep-plus-CHoCH model forces you to wait for two confirmations: liquidity taken, then a structural shift. This removes the guesswork and gives you a tight, logical stop.

Step 1: Mark resting liquidity. Identify equal highs, equal lows, Asian session highs/lows, or previous day highs/lows. These are the pools smart money targets. Draw them on your HTF (H1 or H4). Do not trade until one is taken.

Step 2: Wait for the sweep. Price must pierce the liquidity level with a wick, then close back inside the prior range. A sweep is only valid when the candle body closes back through the level. If the body closes outside, that is a breakout, not a sweep, and the model does not apply.

Step 3: Drop to lower timeframe. Once the sweep prints on H1, drop to M5 or M15. You are now looking for a Change of Character: the first lower-timeframe structure break in the opposite direction of the sweep. For a bullish reversal after a low sweep, you want M5 to break its most recent lower high.

Step 4: Entry on the retest. After CHoCH, do not chase. Wait for price to retrace into the newly created order block or FVG left by the CHoCH displacement leg. Enter on the touch with a limit order or on a 1m confirmation candle.

Step 5: Stop placement. Stop goes just beyond the sweep wick extreme, typically 3-5 pips beyond. This is the hard invalidation: if price breaks the sweep extreme, the reversal thesis is dead. Because the stop is tight (often 8-15 pips on FX majors), risk-reward of 1:5 or better is realistic.

Step 6: Targets. First target is the origin of the move that created the swept liquidity (internal liquidity). Second target is the opposing external liquidity. Scale out 50% at the first target, move stop to break-even, trail the rest.

Common failure: weak CHoCH. If the lower-timeframe CHoCH lacks displacement (no strong body candles, no FVG), it is often a fakeout. Require at least one full-body displacement candle on the CHoCH leg before committing.

Time filter. Sweeps during the London open or New York open carry the highest weight. Sweeps during the dead Asian session are frequently meaningless and should be downranked or skipped entirely.