Before entering a reversal trade, a trader must resist the emotional urge to "buy the dip" immediately after the liquidity sweep. The goal is to let the market prove the breakdown was a trap. The first and most critical signal is price reclaiming the engineered support zone. Simply spiking below support with a long wick is not enough; the candle must close firmly back inside or above the breached level, demonstrating that sellers are exhausted and buyers are absorbing the supply.

The second signal is a Market Structure Shift (MSS) on a lower timeframe. This occurs when the price breaks the previous swing low (the sweep) and then immediately breaks back above the last lower high established during the fakeout. This shift confirms that bearish momentum has officially failed.

Next, look for Bullish Displacement. This is a strong, wide-ranging bullish candle with high momentum that violently pushes price away from the support zone. Coupled with this, a Fair Value Gap (FVG) or an Order Block (OB) forming on the retracement provides the precise entry zone. Institutions often leave these imbalanced areas behind; a retest of this zone before the next leg up offers a low-risk entry.

Finally, volume confirmation is paramount. The reversal candle must show a surge in volume compared to the previous selling candles. This indicates that institutional capital, not just retail noise, is flowing into the move. Additionally, the Money Flow Index (MFI) should show bullish divergence, with price making a lower low but the MFI making a higher low.

Ultimately, the rule is: Wait for the bait to be taken, wait for the trap to snap shut, and only enter when price confirms intent through structure breaks and volume.