Three-Candle EMA Trend Signals in Larry Williams’ Strategy

Summary

This document describes a trend-following system using separate EMAs of highs and lows, with adjustable periods. Its entry and exit logic also checks for a run of four consecutively rising or falling closes: a long position opens when the close is below the low-based EMA during such a run, and closes when the close is above the high-based EMA. Positions are also intended to close at the end of the trading day.

The published backtest settings identify BTC/USDT futures and a daily chart with hourly base data, but provide no performance results. The source leaves its date-range condition permanently true, so the configurable dates do not actually filter trades. Its stated description of three candles also differs from the source’s four-close comparison, and the source’s end-of-day condition is not clearly implemented. The strategy is long-only and gives no quantified evidence that it is profitable. The accompanying discussion warns of whipsaws in sideways markets, sensitivity to parameters, and gap risk; it suggests additional filters and risk controls.

Key ideas

• The strategy calculates separate EMAs from high and low prices, with adjustable periods.
• A long entry requires a close below the low EMA and four consecutively rising or falling closes.
• A close above the high EMA triggers an exit from an existing long position.
• The document describes daily position closure, but the source code's end-of-day condition is unclear.
• The stated backtest setup gives no performance statistics, and its date filter is inactive in the source.

Tags

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