PASSED WALK-FORWARD

Liquidity Sweep + Rejection on XAUUSD M15 — The Raw Signal That Passed

A liquidity sweep is when price pushes past a prior swing high or low — running the stops clustered there — then closes back inside the range. It's the single highest-conviction pattern in our whole framework, and the raw signal alone survives a walk-forward test.

Win rate
52%
Profit factor
1.22
Max drawdown
-5.2%
Folds passed
21 / 32

The setup

Wait for price to sweep a prior swing high or low by a meaningful distance, then close back through that level on the same or next bar. Enter on the close, stop just beyond the sweep wick, target the opposite side of the range. No filter yet — this is the raw signal quality.

The result

21 of 32 anchored out-of-sample folds were profitable (65.6%), at a 52% win rate and a 1.22 profit factor with a shallow -5.2% max drawdown. That's a real, if modest, edge — before any of the filters that later improve it.

Why it works

Sweeps mark the moment liquidity is taken: large players need resting orders (retail stops) to fill size, so price reaches for them and reverses. The rejection close is your evidence that the move was a raid, not a breakout. You're trading with the flow that just absorbed the stops.

Where it goes next

On its own the sweep is a keeper. Adding a higher-timeframe trend filter (only take sweeps in the H1 direction) lifted the profit factor to 1.41 — see the linked experiment. Session timing and partial exits improve it further.

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FAQ

What is a liquidity sweep in trading?
It's when price briefly pushes past a prior swing high or low to trigger the stop orders resting there, then reverses back through the level — signalling the real direction.
Is the liquidity sweep strategy profitable on gold?
In our walk-forward test on XAUUSD M15 the raw sweep-and-rejection signal passed with a 1.22 profit factor across 21 of 32 folds.