Combining 123 Reversal and Confluence Signals for Trading

Summary

This strategy combines a 123 reversal signal with a multi-period confluence indicator and opens a position only when both point in the same direction. The reversal component uses recent price changes together with stochastic readings around a configurable level. The confluence component combines moving-average differences, momentum, and other calculations into a graded directional signal; the described scale ranges from bearish to bullish. When the components agree, the strategy enters long or short, with an option to invert direction. When they do not agree, it closes positions.

The document presents rules, configurable parameters, and a short published backtest setup for BTC/USDT futures on Binance. It gives no performance statistics or evidence that the claimed stability or win-rate benefits were achieved. The source logic and prose are not fully aligned: the prose describes consecutive two-day moves, while the code uses a different bar-based condition, and the code treats a neutral confluence state in a way that can affect whether the combined signal persists. The authors identify failed reversals, signal disagreement, parameter complexity, and operational burden as concerns; stop losses and position management are proposed improvements.

Key ideas

• The strategy requires the 123 reversal and confluence components to agree before entering a directional position.
• The 123 component combines recent price movement with stochastic readings.
• The confluence component aggregates signals from moving averages, momentum, and related calculations into graded directional states.
• The published BTC futures backtest configuration provides no performance results.
• The described rules and source code differ in how they define the reversal condition.

Tags

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