Long Reversals After Consecutive Down Bars and Up Bars

Summary

This long-only reversal strategy looks for a run of declining closes followed by a run of rising closes. The configured defaults require three consecutive down bars and two consecutive up bars; when the pattern appears and no position is active, the strategy enters long. It sets an initial stop at the lowest close among the latest three bars and exits if price falls below that level or below the current high minus twice a seven-period ATR. The parameters also specify a date range, although the source’s date function always returns true.

The document supplies a BTC/USDT futures test configuration but gives no performance statistics. It describes the pattern as a possible short-term reversal, while noting that it may fail during persistent trends and that a nearby stop can be triggered by ordinary price movement. It also identifies turnover and transaction costs as concerns. Potential extensions include adjusting bar counts to market conditions, using dynamic stops, adding filters, and sizing positions; these are suggestions, not demonstrated improvements.

Key ideas

• The entry rule buys after a configured sequence of falling closes is followed by rising closes.
• The default pattern uses three down bars and two up bars.
• The exit uses the lowest close among three recent bars or a trailing threshold based on twice a seven-period ATR.
• The strategy is long-only in the supplied implementation and may fail when declines continue.
• The document provides a futures test configuration but no performance evidence, and its date filter is ineffective in the shown source.

Tags

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