Five-EMA Alert Candle Breakdowns with Fixed-Risk Position Sizing

Summary

This short-only setup looks for an alert candle after the preceding three candles touch or approach the 5-period EMA and the current candle sits above it without touching. It records the alert candle’s high and low, then places a short entry if price breaks below its low. Position size is calculated by dividing a stated fixed dollar risk by the alert candle’s range; the stop is placed at its high and the target is set at the same distance from entry, yielding a 1:1 risk-to-reward structure.

The document describes the rules, chart annotations, and a backtest configuration for ETH/USDT futures over a daily timeframe, but supplies no performance statistics. It notes false-breakout, overtrading, and fixed-risk scaling concerns, and suggests additional filters such as volume or higher-timeframe direction. The written rules and code excerpt may not fully agree on candle timing and order triggering, so implementation details should be checked before drawing conclusions. No evidence here establishes profitability or robustness.

Key ideas

• The setup identifies a candle above the 5-period EMA after three prior candles touch or approach the average.
• A break below that candle’s low triggers a short entry, with its high serving as the stop reference.
• Position size scales inversely with the alert candle’s range to target a fixed dollar risk.
• The target mirrors the stop distance, and the document provides no results proving the approach’s effectiveness.

Tags

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