Three Outside Up Candlestick Pattern and Backtest Rules

Summary

This document presents a three-candle bullish reversal pattern: a bearish first candle is followed by a bullish engulfing candle, then another bullish candle that closes above the preceding candle. The script colors bars when the pattern conditions are met and includes configurable take-profit and stop-loss distances in pips. It is labeled as a backtest, but the page provides no performance statistics or market-specific test settings.

There is an important discrepancy between the pattern description and the script's trading behavior. When the described bullish pattern is detected, the code sets a position state that triggers a short entry, rather than a long entry. Its profit and stop checks also depend on the stored signal price and reset that state when price crosses either threshold; the excerpt does not explain execution assumptions or show that these rules work as intended. The source itself frames the script as educational and notes that it changes bar colors. Traders should inspect and validate the implementation before interpreting it as evidence for the pattern's profitability.

Key ideas

• The named pattern combines a bearish candle, a bullish engulfing candle, and a further bullish close above the prior candle.
• The script exposes take-profit and stop-loss distances in pips.
• The page contains no reported backtest results or specified tested market.
• The code enters short on the described bullish pattern, contrary to the pattern's stated reversal interpretation.
• The implementation is presented for educational use and warrants careful validation.

Tags

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