Combining 123 Reversal Signals with ECO Trend Filtering

Summary

The Surf Rider concept combines a short-term reversal signal with the Ergodic Candlestick Oscillator (ECO), a momentum measure based on candle body direction and size. The described 123 component uses consecutive closing-price changes and stochastic conditions to identify potential reversals. ECO classifies direction by whether its smoothed value is above or below zero. A position is taken only when both components agree, and the implementation closes all positions when their combined signal is neutral.

The document presents this agreement rule as a way to filter trades, while acknowledging that it can miss signals and that reversals may perform poorly in ranges or low-liquidity conditions. It lists parameters and backtest settings for BTC/USDT futures over about a month of hourly bars with 15-minute base data, but provides no performance statistics. There is also a discrepancy between the prose description of the reversal rules and the code’s stochastic comparisons, so the exact signal definition should be checked before reproducing the strategy. No stop-loss method is implemented in the supplied script.

Key ideas

• The system combines a stochastic-based reversal signal with ECO momentum direction.
• Trades are opened only when both components indicate the same direction.
• The code closes positions when the combined signal becomes neutral and contains no explicit stop loss.
• The document warns about range-bound conditions, low liquidity, and missed trades from the confirmation filter.
• Backtest settings are stated, but performance results are absent and the prose and code differ in signal details.

Tags

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