Trading Candle Direction Counts as a Long-Short Signal

Summary

This strategy counts bullish, bearish, and neutral candles over a configurable recent window, then uses the balance of bullish and bearish candles to choose a position direction. In the accompanying source, neutral candles increase the magnitude of the prevailing directional count; a positive result leads to a long entry, while a nonpositive result leads to a short entry. The stated example sets the candle count parameter to seven and describes the method as usable across instruments and timeframes.

A one-month BTC_USDT futures backtest configuration is provided, but the document reports no returns, drawdowns, or other performance evidence. The source counts from index zero through the supplied maximum, which may include one more candle than the parameter name suggests. It also classifies candles using a rounded close-open difference, so the definition of a neutral candle depends on rounding. No explicit stop loss or cost model appears in the shown strategy. The document warns that reversals, range-bound conditions, transaction costs, and parameter overfitting may undermine results.

Key ideas

• The method compares counts of bullish and bearish candles in a recent sample.
• Neutral candles add to the magnitude of whichever direction currently has the larger count.
• A positive adjusted count triggers a long, while zero or a negative count triggers a short.
• The example sets the count parameter to seven, though the source loop may include an additional candle.
• The published short backtest configuration contains no reported performance results.

Tags

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