Quantifying Spinning-Top Reversals with Fixed Risk-Reward Exits
Summary
This reversal method looks for a spinning-top candle after three consecutive candles of the same color, with the new candle changing direction. It defines the pattern quantitatively: the real body must be under 30% of the candle range, and the upper and lower wicks must be within 20% of the range of each other. A bullish color change triggers a long, while a bearish change triggers a short. The described exits place a stop four points beyond the signal candle’s low or high and set a profit target at 1.5 times the risk.
Position size is described as a percentage of account equity. Published settings specify a three-hour ETH/USDT futures backtest over part of early 2025, but the document supplies no results to support its profitability claims or the stated theoretical win-rate illustration. Fixed-point stops may not fit different instruments or volatility regimes, and gaps can cause larger losses than planned. Choppy markets may also produce frequent entries; the document proposes volatility-aware stops and trend or time filters as possible refinements.
Key ideas
- A signal requires three same-color candles followed by a color change on a quantitatively defined spinning top.
- The body and wick proportions turn a visual pattern into explicit rules.
- Stops are placed four points beyond the signal candle, with a target set at 1.5 times the risk.
- The strategy describes equity-percentage sizing but reports no backtest performance results.
- Fixed stops, gaps, frequent signals, and parameter sensitivity can weaken practical outcomes.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.