Bar-Third Price Action Rules for Trend Following

Summary

This strategy classifies each candle by where its open and close fall within the candle’s range, divided into lower, middle, and upper thirds. It uses the previous candle’s bullish or bearish classification together with a narrower set of current-candle patterns to generate directional signals. A buy signal closes any short and opens a long; a sell signal closes any long and opens a short.

The document provides rule descriptions and Pine Script source, plus a brief BTC-USDT futures backtest configuration covering a short hourly sample. It does not report performance results, so the configuration alone cannot establish whether the rules are profitable. The strategy has no built-in stop-loss or profit-taking method, and the text itself warns of false signals in sideways markets, delayed entries while waiting for bar closes, and sensitivity to timeframe and market conditions. It suggests volatility filters and additional risk controls as possible extensions, but does not test them.

Key ideas

• Each candle’s open and close are classified by their positions within three equal parts of its high-low range.
• A bullish signal requires a bullish previous candle and a qualifying bullish current candle; bearish signals follow the mirrored pattern.
• Signals reverse the existing position and enter in the new direction using market orders.
• The rules may produce false signals in ranging markets and have no built-in stop-loss or profit target.
• The published backtest settings describe a short hourly sample but provide no performance evidence.

Tags

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