Liquidation Cascade Reversal
Forced liquidations overshoot. When leveraged longs are stopped out in a cascade, price briefly trades below any rational value as the exchange engine dumps size into a thin book. Fading the final flush captures the snap-back as real bids return.
Setup & Rules
Require an observable liquidation spike (aggregated liq feed) into a prior high-volume node. This is a countertrend scalp — it only works at genuine exhaustion, not at the start of a move.
Entry
Enter on the first higher-low that prints after the liquidation wick, not on the wick itself. Catching the knife is not the trade; catching the recoil is.
Exit
Target the mean of the pre-cascade range or the first liquidity shelf above. Time-stop the trade if the snap-back has not begun within a few candles — momentum should be immediate.
Risk Management
Hard stop below the liquidation low, sized tight because the invalidation is close. This strategy has a high hit rate but fat left-tail losers when a cascade is actually a trend-start — respect the stop absolutely.
Portfolio Management
A small, opportunistic satellite. Its edge is event-driven and lumpy, so budget it as a fixed fraction and never let a hot streak inflate its size.
Evidence
49% raw win-rate but +1.4 average R thanks to asymmetric payoff. Trend is cooling as liquidation data becomes more widely watched and the overshoot compresses.
Flywheel Automation
Needs a low-latency liquidation feed and sub-second execution — automation-first by necessity. Currently at Paper maturity in the engine; downtime forfeits the whole edge since the window is measured in seconds.