Candlestick Body Size Signals for Contrarian Long and Short Entries

Summary

This strategy compares each candlestick's body size with an exponentially smoothed average over 30 bars. It opens long after a bearish candle whose body exceeds that average, and short after an oversized bullish candle. An open position is closed when a candle in the opposite direction appears and the trade is profitable. The setup is therefore contrarian at entry, with the candle's size used as a measure of unusually strong movement.

The document describes the approach as simple and adjustable, while warning that a large body may reflect ordinary volatility rather than a durable move. It suggests testing other lookback lengths, adding indicators or consecutive-candle confirmation, and using position controls or stops. The published settings show a BTC_USDT futures backtest from October to November 2023, using one-hour bars and a 15-minute base period, but no performance results are supplied. The stated exit rule only closes a position when it is profitable, so adverse trades may remain open; the listed improvements are proposals rather than tested findings.

Key ideas

• The strategy compares candle body size with an exponentially smoothed average over 30 bars.
• An unusually large bearish candle triggers a long entry, while a large bullish candle triggers a short entry.
• Positions close on an opposite-color candle only when the trade is profitable.
• The backtest settings specify BTC_USDT futures with one-hour bars and a 15-minute base period.
• Large candle bodies can be ordinary volatility, and no performance results are reported.

Tags

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