2️⃣Example Strategy 2: Reversal Trap Strategy (Liquidity Bounce)

This strategy captures mean-reversion setups that occur after aggressive liquidations or emotional selling. It relies on detecting divergence between price dumps and growing Open Interest, alongside aggressive market selling (negative Vdelta). When this happens with high tick activity and volume, it often signals a liquidity trap followed by a strong bounce.

Alert Configuration

To set up this reversal alert in ErkeScan:

1. Go to the Alerts section in the Web Dashboard

2. Click "Create an Alert"

3. Use these parameters:

Parameter	Condition	Value
Change 1h	<	-2.5
OI Change 1h	>	2
Vdelta 1h	<	-1,500,000
Ticks 1h	>	500
Volume 1h	>	$10,000,000
(Optional) Funding Rate	<	-0.01

Example Scenario

• A token drops -3% in 1h

• Open Interest increases +2.5% (traders shorting into the fall)

• Vdelta is negative (aggressive sells)

• Tick count > 500 (liquidations or panic execution)

• Volume = $15M (significant liquidity)

This pattern is common before a short squeeze or bullish reversal.

Trading Approach

1. Receive alert for reversal setup

2. Open chart — check for signs of exhaustion (long wicks, divergence, reclaim patterns)

3. Enter counter-position (long if dump, short if pump)

4. Set stop-loss below recent low (for longs) or above high (for shorts)

5. Target mean reversion zone or 1:2 RR area

Backtesting Results

Tested across major tokens in 2024 bear/bull cycles:

• ✅ Win rate: 63%

• ⚖️ Average RR: 1:2.1

• 🚨 Most accurate after liquidations and funding imbalances

Pro Tips

• Best during NY & EU sessions where volume is real

• Works well with RSI or Bollinger Band bounce

• Avoid setups without OI increase (no trap = no reversal)