Combining a 123 Reversal Signal with Modified Price-Volume Trend

Summary

This strategy combines a price-and-stochastic reversal signal with a modified price-volume trend filter. The reversal component tracks recent closing-price direction alongside fast and slow stochastic values: it signals long when the coded upward price pattern coincides with the fast oscillator below the slow one and above a threshold, and short under the mirrored conditions. The second component accumulates a volume-scaled measure of typical-price changes and compares it with its moving average.

A position is taken only when both components agree on direction; otherwise, the strategy closes its positions. An optional setting reverses the combined direction. The source also specifies default input values and describes the first component as drawing on a futures trading book. It supplies no backtest results or evidence that the combination is profitable. The source comments and the implemented reversal conditions do not fully align in their verbal description, so the actual coded conditions should be checked when interpreting or reproducing the method.

Key ideas

• The reversal component combines recent closing-price moves with the relationship between fast and slow stochastic values.
• The modified price-volume trend compares its cumulative volume-scaled price-change measure with a moving average.
• The strategy enters long or short only when both component signals agree.
• When the combined signal is neutral, the strategy closes all positions; an option can invert directional signals.
• The document provides code but no performance evidence, and its explanatory comments differ from some coded conditions.

Tags

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