Three Outside Up Candlestick Pattern and Its Backtest Rules

Summary

The strategy identifies a three-candle bullish reversal formation. The first candle is bearish, the second is a larger bullish candle whose body engulfs the first, and the third is bullish with a close above the second candle’s high. The code marks the pattern and uses its signal to set a price reference, then opens a short position while that reference remains active.

Inputs specify take-profit and stop-loss distances in pips, and the script closes positions when the reference is cleared. Despite the bullish name and pattern description, the coded entry is short, a mismatch that readers should inspect before interpreting any results. The document supplies no strategy report, sample, or performance figures; its educational warning and compact implementation do not establish profitability. The pip-based distances may also need instrument-specific interpretation, and the bar-coloring logic is part of the displayed behavior rather than evidence of predictive value.

Key ideas

• The pattern combines a bearish candle, a larger bullish engulfing candle, and a third bullish close above the prior high.
• The script’s entry logic opens a short position after detecting the formation, despite its bullish reversal description.
• Take-profit and stop-loss distances are user inputs expressed in pips.
• No backtest evidence or performance statistics are included, and the direction mismatch warrants careful review.

Tags

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