Lookback Highs and Lows with Ratio-Based Stops and Targets

Summary

This strategy uses the highest and lowest prices over a configurable number of recent bars to choose a trade direction. If the current bar sets the lookback high, it opens a buy; otherwise, it opens a sell. The premise is that prices often revisit recent extremes over short horizons, though the document does not provide evidence to validate that assumption.

The default take-profit target is the relevant lookback extreme: the high for a buy and the low for a sell. An adjustable profit parameter can move that target farther away or closer. The stop-loss distance is calculated by dividing the take-profit distance by a profit-to-loss ratio, so a ratio of two makes the stop half as far away as the target. The description warns that invalid parameter values can cause incorrect behavior and that the method may fail when the current price is already at the lookback high or low. No instrument, timeframe, or performance results are specified.

Key ideas

• The strategy compares recent highs and lows over a configurable bar window to determine trade direction.
• A new lookback high triggers a buy, while other cases trigger a sell.
• Take-profit levels are set at the corresponding lookback extreme and can be adjusted.
• Stop distance is derived from the target distance and the chosen profit-to-loss ratio.
• The described logic has input-limit and current-extreme edge cases and provides no performance evidence.

Tags

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