Combining the 123 Reversal System with Fast and Slow Kurtosis

Summary

This strategy combines a 123 reversal signal with a fast and slow kurtosis indicator (FSK). The 123 component uses consecutive-bar price relationships and a Stochastic oscillator to indicate a possible reversal. FSK assesses momentum changes using a smoothed measure derived from momentum acceleration. A position is opened only when both components point in the same direction; an optional setting reverses those signals.

The document argues that combining indicators may filter some signals, but it presents no empirical results to support claims about accuracy or robustness. Reversal entries can be mistimed, and countertrend positions can lose money when a trend persists. Parameter choices may overfit, while frequent trading can add costs. Suggested safeguards include trend filters, stops, position sizing, and transaction-cost analysis. Published settings specify a BTC/USDT futures backtest period, but no return, drawdown, or cost figures are given.

Key ideas

• The 123 system uses consecutive price bars and Stochastic conditions to identify potential reversals.
• FSK provides a second signal based on a smoothed measure of momentum acceleration.
• The strategy opens a position when both indicators agree, with an option to reverse direction.
• False reversal signals and persistent trends can create losses.
• The document provides backtest settings but no performance or transaction-cost results.

Tags

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