Candlestick Absorption Signals Using Candle Size and Volume

Summary

This bidirectional strategy looks for a two-candle pattern using direction, body size, and volume. The adjacent candles must move in opposite directions, the later candle's open-to-close range must be larger, and its volume must be lower than both the preceding candle's volume and the volume before that. If these conditions hold, the later candle's direction selects a long or short entry. The described implementation uses full account equity per position and tracks position state.

The document specifies a daily BTC/USDT Binance futures backtest spanning several years, but provides no performance statistics or conclusions from that test. It warns that the pattern can produce false signals in sideways markets, that candle-close confirmation can delay entry, and that full-position sizing creates substantial exposure. It suggests trend filters, volatility-based sizing, ATR stops, and time filters, but does not evaluate those changes.

Key ideas

• The setup requires two adjacent candles with opposite directions and a larger body on the later candle.
• The earlier candle's volume must exceed the later candle's volume, which must also be below the prior candle's volume.
• The later candle's direction determines whether the signal is long or short.
• The stated implementation uses full-position sizing, increasing exposure to losses.
• The published daily BTC/USDT futures test settings are not accompanied by performance results.

Tags

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