Price-Extreme Reversal Confirmation Using Lookback Levels

Summary

This reversal strategy finds the highest high and lowest low over a configurable lookback period, then records the opposite extreme on the bars where those levels occurred. A bearish signal appears when the current close falls below the low associated with the lookback high; a bullish signal appears when the close rises above the high associated with the lookback low. Trigger flags prevent repeated signals until a new lookback extreme resets the corresponding flag. The document also describes calculating an EMA over the lookback, though the supplied entry logic does not use it.

The example sets a 50-bar lookback and provides BTC-USDT futures backtest settings, but reports no performance results. The author identifies choppy follow-through, frequent trades, trading costs, and the absence of explicit stops and targets as limitations. The method supplies entry signals only; traders would need to assess exits, position sizing, market suitability, and parameter choices separately.

Key ideas

• The strategy identifies lookback-period highs and lows and links each to the opposing price extreme on that bar.
• A close below the low associated with the highest high signals bearish reversal confirmation.
• A close above the high associated with the lowest low signals bullish reversal confirmation.
• Trigger flags suppress repeated signals until a new corresponding extreme is reached.
• The described EMA is not used by the supplied entry logic, and explicit stop loss and take profit rules are absent.

Tags

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