Capitulation Stretch Reversion with Regime, Stop, and Time Filters

Summary

This price-based mean-reversion strategy looks for a sharp pullback within a bullish regime. A long regime is defined by price above a long EMA; the optional short side applies the reverse condition below that EMA. For a long setup, price must fall a configurable ATR distance below a short EMA, record a run of lower closes, and then finish a bar higher than it opened. The short setup mirrors these conditions and is disabled by default.

Trades target a return to the short EMA, with a volatility-based protective stop and a time exit if neither target nor stop is reached within the configured holding period. The author notes the payoff tradeoff: a nearby target can produce frequent wins while the wider stop leaves individual losses larger than winners. The code specifies commissions and slippage but the supplied material gives no backtest results, asset-specific evidence, or proof that the setup has an edge. Outcomes may depend heavily on market regime and parameter choices.

Key ideas

• The regime filter permits longs above a long EMA and optional shorts below it.
• A setup requires an ATR-scaled price extension from a short EMA, consecutive closes in the stretch direction, and a reversal-colored bar.
• The mean EMA is the target, while an ATR-based stop and a maximum holding period manage exits.
• The strategy is long-biased by default, with shorts disabled unless explicitly enabled.
• The document explains the asymmetric payoff structure but supplies no evidence of profitability.

Tags

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