Pattern Entries with ATR Trailing Stops and Risk-Reward Targets
Summary
This trading system combines candlestick-pattern entries with volatility-aware exits and fixed-risk position sizing. It describes entries based on a two-bar reversal pattern, then sets a stop beyond recent price extremes adjusted by an ATR multiple. Position quantity is calculated from a fixed risk amount divided by the distance to the stop, while a preset risk-reward ratio determines the profit target. Optional RSI extremes can also close a position.
The document lists configurable lookback, ATR, risk-reward, direction, and RSI settings, and gives a BTC/USDT futures backtest window from November to December 2024 without reporting results. It warns that pattern recognition can be unreliable, stop orders may slip in volatile markets, RSI exits can cut trends short, and parameter tuning may overfit. The source code also merits careful validation: both long and short entries use the same pattern condition, and some described pattern variants are not used as entry triggers. No evidence is supplied that the system is profitable or that its fixed risk assumptions hold in live execution.
Key ideas
- Entries are based on a two-bar candlestick pattern, with the same condition used for both trade directions in the source.
- Stops trail recent highs or lows with an ATR adjustment.
- Position size is calculated from a fixed risk amount and the distance to the stop.
- A preset risk-reward ratio defines a target, while RSI extremes can trigger additional exits.
- The sample backtest settings contain no reported performance results.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.