Aroon-Ehlers Liquidity Pullback

Family: pullback · Regime: trending · Complexity: medium · Asset classes: Equities, Forex, Crypto · Timeframes: M15, H1

Thesis

This strategy assumes that high-momentum price shifts (Order Blocks) represent institutional participation, and that price will likely retest these zones before continuing in the direction of the dominant trend (Aroon/Ehlers). The edge exists because the market often mean-reverts to liquidity pockets before trend continuation, provided the broader trend regime remains intact.

Components

• Aroon (regime) — Acts as the primary trend filter; long positions only allowed when Aroon Up > 70 and Aroon Up > Aroon Down, indicating a fresh bullish cycle.
• Ehlers SuperSmoother Filter (direction) — Provides the immediate trend direction with less lag than an EMA. Price must be above the filter for longs and below for shorts.
• Sonarlab - Order Blocks (entry) — Identifies institutional supply/demand zones. Entry is triggered when price retraces into a recently formed Order Block zone.
• ATR Fib (exit) — Provides target levels based on session volatility. Exit occurs at the 1.0 (100%) or 1.111 Extension levels.
• Daily High Low MTF (risk) — Defines the hard stop-loss based on the previous day's extreme (High or Low) to ensure the trade is invalidated if market structure breaks.
• MindTheGap (volatility_filter) — Acts as a volatility/liquidity filter: trades are avoided if a gap larger than the threshold occurs against the trade direction, suggesting exhausted momentum.

Known failure conditions

• The ATR Fib levels remain static while the market moves into a high-volatility regime, leading to premature exits.
• The Aroon indicator remains pinned at 100/0 during extended parabolic moves, preventing re-entry.
• Previous day's High/Low is too distant, creating a Reward-to-Risk ratio < 1.0.

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