Contrarian CAC 40 Reversal Signals Filtered by Prior-Day Candle Shape

Summary

This daily CAC 40 strategy takes the opposite side of a signal from a three-line-break reversal indicator: it buys when the indicator signals a sell and sells short when it signals a buy. It only enters when the prior daily candle has a small body relative to its high-low range, using a threshold of 0.5. For Monday, the filter uses the candle from two sessions earlier. The example trades two contracts and calculates a 14-period average true range for its exits.

The exit logic combines an ATR-based profit target for long positions and an ATR-based loss limit for short positions with a trailing stop that activates after a favorable move of ten points. The author says a walk-forward analysis is attached, but no results or test details appear in the text. The method depends on an external indicator, and the post does not specify its construction, sample period, costs beyond a stated spread of three, or performance statistics. The asymmetrical long and short exit settings and instrument-specific parameters would need independent evaluation.

Key ideas

• The strategy reverses the direction of signals from a three-line-break reversal indicator.
• Entries require the previous session’s candle body to be small relative to its full range.
• The prior-session filter looks back two sessions when the current day is Monday.
• Long and short positions use different ATR-based exit rules alongside a ten-point trailing stop.
• The post mentions walk-forward analysis but provides no results or test methodology in its text.

Tags

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