Three-Day Narrowing Pattern for Mean-Reversion Entries

Summary

This long-only mean-reversion method looks for a short-term bounce after three consecutive days of lower highs and lower lows. It requires the close to remain above a 200-day EMA while sitting below a 5-day EMA, then exits when the close crosses above an adjustable exit EMA, defaulting to five days. The document relates the setup to a published ETF reversion idea and says its own variation uses an EMA instead of an SMA, but gives no comparative results to support that choice.

The intended setting is a range-bound market, where a brief decline may reverse. Continued selling can invalidate the signal, while choppy conditions can trigger repeated exits. The published test uses BTC/USDT futures over a one-week period with 10-minute bars and one-minute base data; it reports no performance metrics. The stated 1–2 day holding period is a qualitative description, not a result established by the supplied test settings.

Key ideas

• The entry requires price above a 200-day EMA, below a 5-day EMA, and three days of consecutively lower highs and lows.
• A close crossing above an adjustable exit EMA closes the long position.
• The method seeks short-term rebounds and is intended for range-bound conditions.
• Further declines and repeated exits in choppy markets are identified risks.
• The brief published BTC/USDT test provides settings but no outcome statistics.

Tags

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