A Short-Term Directional Rule from Averaged Open-to-Close Ratios

Summary

This simple directional strategy uses the ratio of each bar’s open to its close. A ratio below one corresponds to a close above the open and is treated as bullish; a ratio above one is treated as bearish. The example averages this ratio across the previous nine bars, entering long when the mean is below one and short when it is above one. The published backtest settings specify BTC/USDT futures on Binance, using four-hour bars with a 15-minute base period over a one-week span in September 2023.

The document presents the rule as computationally simple and suitable for short-term trading, but provides no performance statistics or results. It also acknowledges that candle direction alone can generate false signals, offers no broader trend assessment, and may lead to frequent trades, fees, and large drawdowns if position sizes are high. Volume or trend filters, stop rules, and position sizing are suggested as possible additions.

Key ideas

• The strategy averages open-to-close ratios over the previous nine bars.
• A mean ratio below one triggers a long entry, while a value above one triggers a short entry.
• The example settings use BTC/USDT futures data with four-hour bars and a 15-minute base period.
• The document provides no reported backtest performance metrics.
• Candle-only signals can be unreliable and frequent trading can increase costs and drawdowns.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.