Four-Candle Reversal Pattern with Equal-Distance Stops and Targets
Summary
The document describes a simple forex trading pattern based on four consecutive candles. A bullish setup consists of two bearish candles followed by two bullish candles; a bearish setup consists of two bullish candles followed by two bearish candles. The suggested entry is at the next bar’s open in the direction of the last two candles.
The stop distance is based on the signal candle’s range from its close to its low for a long, or to its high for a short. The profit target is set to the same distance, creating a nominal one-to-one reward-to-risk ratio before trading costs and execution effects. The post’s prose has an apparent typo in its descriptions of the candle sequences, while its rule logic specifies the pattern clearly. It claims broad effectiveness but provides no backtest data, market-by-market results, or discussion of costs, slippage, and parameter sensitivity, so the claim is unsubstantiated in the document.
Key ideas
- A bullish setup follows two bearish candles with two bullish candles.
- A bearish setup follows two bullish candles with two bearish candles.
- Entries are placed at the next bar’s open in the direction of the final two candles.
- The stop uses the signal candle’s extreme, and the target distance matches the stop distance.
- The document provides no performance evidence or assessment of costs and execution.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.