Previous-Candle Breakouts Filtered by Moving-Average Trend

Summary

This strategy trades moves beyond the prior candle’s body level, using candle direction and moving averages to qualify entries. A bullish candle crossing above the previous bearish candle’s open can trigger a long, while a bearish candle crossing below the previous bullish candle’s open can trigger a short. An optional second-candle rule allows a later candle to confirm a break, and the strategy can use a fast average alone or compare fast and slow averages for trend direction.

Exits can be based on a fast-average cross, an optional trailing EMA, or an opposing candle. The document gives a BTC/USDT futures backtest configuration spanning roughly one year, but reports no performance results. It warns that false breaks are more common in sideways markets and that moving averages can lag. The source code also differs in detail from the overview’s description of breaking the previous candle’s high or low: its entry checks compare closing price with the prior candle’s open. Its short entry is submitted as a long order in the supplied source, so implementation should be reviewed before relying on it.

Key ideas

• The strategy qualifies prior-candle breaks with candle direction and moving-average trend filters.
• A second-candle option can confirm a break that was not triggered on the immediately preceding candle.
• Exits can use moving-average crosses, a trailing EMA, or an opposing candle.
• Sideways markets can produce false breakouts, while moving-average filters may respond slowly.
• The supplied short-entry code uses a long order direction, which conflicts with the stated short strategy.

Tags

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