Inside Bar Failure Signals for Short-Term Reversal Trades
Summary
This script turns failed breaks of an inside bar into long and short entries. It first identifies an inside bar by comparing the prior candle’s high and low with those of the candle before it. A long signal occurs when the current bar breaks below the inside bar’s low, stays below its high, and closes back above the inside bar’s low. The short setup mirrors these conditions: price moves above the inside bar’s high, remains above its low, and closes back below its high.
The strategy closes a position after a user-selected number of bars, with three bars as the default. The accompanying description suggests changing this setting to inspect how the signal performs over different holding periods. No performance figures, chart results, or market-specific tests are included, so the script alone does not establish an edge. It also gives no stop-loss, sizing, or transaction-cost rules; these would matter when evaluating the pattern in a backtest or live trading.
Key ideas
- An inside bar is identified when its range falls within the preceding candle’s range.
- A downside failure that closes back inside the range triggers a long entry.
- An upside failure that closes back inside the range triggers a short entry.
- Positions are closed after a configurable number of bars.
- The document provides no performance evidence or explicit risk and cost model.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.