Combining a 123 Reversal Signal with a Bandpass Filter

Summary

This futures strategy combines a short-term reversal setup with a bandpass filter. Its 123 component uses recent closing-price direction and a 9-period stochastic oscillator to identify potential reversals. The bandpass component classifies direction by comparing its calculated value with a trigger threshold. A position is held only when both components agree: aligned bullish signals produce a long, aligned bearish signals produce a short, and disagreement closes positions.

The document lists adjustable settings for the stochastic and bandpass calculations and gives a Binance BTC/USDT futures backtest configuration using hourly bars with a 15-minute base period over January 2024. It reports no performance statistics, so its claims that the combination improves results are not substantiated with evidence. The authors flag overtrading, losses in choppy conditions, and transaction costs; parameter sensitivity and the absence of a specified stop loss are further practical limits.

Key ideas

• The strategy requires agreement between a 123 reversal signal and a bandpass direction before holding a position.
• The reversal component combines recent price movement with a smoothed stochastic oscillator.
• The bandpass component compares its output with a configurable trigger level to set directional bias.
• When the two components disagree, the strategy closes existing positions.
• The documented backtest setup does not include performance results, and the strategy description identifies costs and choppy markets as risks.

Tags

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