Combining the 123 Reversal Pattern with Bull Power Signals

Summary

This strategy combines a 123-style reversal signal with a Bull Power indicator and takes a position only when both agree. The reversal component looks for two consecutive closes in one direction alongside a Stochastic condition; the accompanying Bull Power calculation classifies directional pressure using current and prior bar prices. Agreement produces a long or short signal, while disagreement leaves the system without a directional entry.

The document presents dual confirmation as a way to reduce signals from either component alone, while noting that it can also exclude trades. Reversals may fail and prices may continue in the prevailing direction; parameter choices can affect signal behavior, and the text characterizes the approach as more suited to medium- or longer-term trading. It recommends stop losses and testing parameters or additional filters. BTC/USDT futures backtest settings are supplied for a one-month period, but no performance data is given. The source rules and published prose do not fully align on the Stochastic comparisons, so the precise signal definition should be verified before implementation.

Key ideas

• The strategy requires agreement between a 123-style reversal signal and a Bull Power direction signal.
• The reversal component combines consecutive closes with Stochastic conditions.
• Requiring two signals may filter some isolated signals while reducing the number of trades.
• Reversal entries can fail when the existing trend continues, making loss controls important.
• The source and description differ in some Stochastic conditions, and no backtest results are reported.

Tags

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