Filtering Three-Line Strike Patterns with ADX and ATR Exits

Summary

This strategy identifies bullish and bearish Three-Line Strike candle patterns, then filters them using ADX so trades are taken only when the indicator exceeds a threshold. ATR sets dynamic stop-loss and take-profit levels. The described pattern uses three candles in one direction followed by a larger candle in the opposite direction; the strategy takes a position aligned with that final reversal candle. The published setup specifies an ETH/USDT spot market backtest configuration, though no performance results are included.

The document notes that the four-candle confirmation can delay entries, ADX lags, and false breakouts may occur in ranging markets. ATR-based exits can also become unsuitable in extreme volatility. The code calculates ADX components and uses ATR distances for exits, but does not describe position sizing beyond the source's stated full-equity default. Suggested additions such as volume confirmation, adaptive parameters, and volatility-based sizing are proposals, not tested features.

Key ideas

• The strategy detects a three-candle run followed by a larger opposite-color candle as a Three-Line Strike setup.
• ADX filters signals based on trend strength, while ATR sets stop-loss and take-profit distances.
• Pattern confirmation takes four candles, which can delay entries, and ADX itself is lagging.
• The document warns that ranging markets and extreme volatility can weaken signals or make exits unsuitable.
• The published ETH/USDT backtest settings contain no reported performance results.

Tags

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