Three Line Strike Reversals with Engulfing Candle Signals
Summary
This strategy marks potential reversals using the Three Line Strike candlestick pattern and standalone engulfing candles. A bullish setup requires three declining candles followed by a larger rising candle; a bearish setup reverses those colors. The script defines engulfing by comparing the current candle’s body size with the prior candle’s and checking that candle direction changes. It plots signals, issues alerts, and can enter long or short positions when the corresponding display option is enabled.
The published backtest settings specify daily ETH/USDT data on Binance over a stated date range, but the document gives no performance statistics or interpretation of results. The strategy uses full equity sizing and disables pyramiding in its configuration. The accompanying discussion flags false signals in ranging markets, slippage on large reversal candles, and delayed recognition after several candles. Volume filters, volatility-based stops, trend filters, and exit rules are suggested as possible additions, not tested features.
Key ideas
- A bullish Three Line Strike follows three declining candles with a larger rising candle.
- A bearish setup follows three rising candles with a larger declining candle.
- Standalone engulfing signals compare candle body sizes and directions across adjacent candles.
- Signal markers and alerts can be configured, and enabled signals trigger strategy entries.
- The document reports backtest settings but no performance results or exit evaluation.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.