Combining the 123 Reversal and Bill Williams Moving Average Signals

Summary

This strategy combines a 123-style reversal signal with a Bill Williams moving-average alignment. The reversal component looks for two consecutive closes in one direction alongside a stochastic condition. The second component uses displaced moving averages of median price with periods of 13, 8, and 5, assigning direction when price and the averages form a matching bullish or bearish order. A trade is entered only when both components agree; the script closes positions when their combined signal is neutral.

The document gives configurable stochastic and moving-average inputs and a backtest setup for BTC/USDT futures using hourly bars in late 2023, but no performance results. Requiring agreement may filter some signals while also delaying or missing trades. The stated risks include parameter sensitivity and losses inherent in reversal methods; it suggests testing settings, adding stops, and considering volume confirmation. No evidence is supplied that these changes improve results.

Key ideas

• The method combines a two-day price reversal pattern and stochastic condition with a moving-average trend signal.
• It trades only when both components indicate the same direction.
• The average component uses displaced median-price averages with periods of 13, 8, and 5.
• The script exits when the combined direction becomes neutral, and the document reports no measured performance.

Tags

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