Combining 123 Reversal Signals with CMO and WMA Momentum

Summary

This strategy combines a 123 price-reversal signal with a Chande Momentum Oscillator (CMO) compared against its weighted moving average (WMA). The reversal component checks successive closing-price moves and confirms with fast and slow Stochastic lines around a threshold. The momentum component takes the CMO, which measures net price movement relative to recent absolute changes, and compares it with its WMA. The strategy takes a long or short position only when both components agree; otherwise, it closes positions. A reverse-trading option flips the resulting direction.

The document provides the indicator logic, configurable inputs, and a published BTC/USDT futures backtest window, but reports no performance statistics. It warns that reversals can fail, signals can switch frequently and incur fees, and settings may produce too many or too few trades. Suggested experiments include changing indicator lengths, adding filters or stops, and controlling entry frequency. The description characterizes the system as robust, but the supplied material does not establish that claim across markets or periods.

Key ideas

• The 123 component uses recent closing-price patterns and Stochastic crossovers to identify reversals.
• The CMO component compares momentum with a WMA to assign a bullish or bearish state.
• Trades are taken only when the reversal and momentum signals point in the same direction.
• The strategy closes positions when the combined signal does not support a direction.
• Frequent signal changes, parameter choices, and reversal failures can affect costs and results.

Tags

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