Gap-Down Reversal Entries with a Long Trailing Stop

Summary

This strategy looks for a potential bullish reversal after a down session: the prior candle closes below its open, the next session opens below the prior low, and that candle closes above its open. It enters long on the following bar and manages the position with an adjustable trailing stop calculated from the current bar’s open. The description recommends considering the symbol’s volatility and broader trend when choosing the stop and market to trade.

The document presents a SHOP chart report using $10,000 starting capital and $10,000 per trade, but it does not provide performance statistics or establish that the setup is profitable. It also clarifies that the entry occurs at the next day’s open, correcting an earlier description that said the close. Results therefore may differ from discretionary entries taken at the reversal candle’s close or the following open. The author notes that stop settings and symbol choice matter, and that reversals can occur in downtrends too.

Key ideas

• A bullish setup requires a red prior candle, an open below its low, and a green reversal candle.
• The strategy enters long on the bar after the reversal condition is met.
• An adjustable trailing stop is calculated from the current bar’s open.
• The described SHOP report does not establish performance across other symbols or entry timings.
• Stop distance should be considered alongside symbol volatility and market trend.

Tags

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