Combining a Stochastic 1-2-3 Reversal with Period High-Low Levels
Summary
The strategy combines a 1-2-3 reversal signal with high and low levels taken from a selectable timeframe and lookback period. Its reversal component uses recent closing-price turns together with fast and smoothed stochastic values: the stated long and short conditions pair price movement with oscillator relationships and a threshold. The level component compares the current close with the selected period’s high and low, carrying forward a directional state based on where price sits relative to those levels.
A trade is opened only when the reversal signal and level-based direction agree; an optional setting flips the resulting direction. When the combined signal is neutral, the script closes open positions. Inputs allow adjustment of stochastic parameters, level timeframe, and lookback. The document describes the logic and cites a futures-market book as the reversal concept’s source, but supplies no backtest results, costs, or robustness analysis. It also cautions that the script is educational and notes that it changes bar colors.
Key ideas
- The reversal component combines a three-close pattern with fast and slow stochastic conditions.
- A separate filter derives directional state from selected-period highs and lows.
- Trades require agreement between the reversal and level signals, with an option to reverse direction.
- Neutral combined signals trigger closure of open positions.
- No empirical performance or robustness evidence is provided.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.