Combining the 123 Reversal Rule with Fractal Chaos Signals

Summary

This strategy combines a 123-style reversal rule with a Fractal Chaos Oscillator signal and trades only when both agree. The reversal component looks for two consecutive closes in the same direction alongside a stochastic condition; the oscillator component uses changes in fractal highs and lows to represent directional trend state. A long or short position is opened on matching signals, and the position is closed when the combined signal no longer supports a direction. The source also includes an option to invert the signals.

The document describes the approach as combining short-term reversal setups with trend detection and notes possible signal conflicts, excessive trading, and losses during strong moves against a reversal entry. It refers to a brief BTC futures backtest setup but gives no reported returns, sample analysis, or evidence for its performance claims. The oscillator description as a bounded trend-strength measure is not fully reflected in the source, which appears to retain direction from detected fractal changes. Risk controls such as stops and position sizing are recommended but not implemented in the shown rules.

Key ideas

• The system requires agreement between a stochastic-based reversal rule and a fractal-derived directional signal.
• The combined signal opens long or short positions and otherwise closes positions.
• The source includes an option to reverse the trade direction.
• The document reports no quantitative backtest results and notes risks from conflicting signals and missing risk controls.

Tags

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