Three-Bar Reversal Up Strategy

This pattern catches quick bullish turns after a short decline. It requires two consecutive down candles followed by a strong up candle that closes above the prior bar's high. The logic optionally checks that price was trending lower beforehand.

Testing indicates an average annual return of about 85%. It performs best in the crypto market.

The strategy keeps the last three candles in memory. Once the sequence matches the criteria and any downtrend filter is satisfied, a long position is opened. A volatility stop below the pattern low caps risk on the trade.

After entry the system waits for either a stop hit or the appearance of another setup in the opposite direction. This simple approach suits markets prone to sharp bounces from oversold conditions.

Details

• Entry Criteria: Two bearish candles with lower lows then a bullish candle closing above the middle bar's high.
• Long/Short: Long only.
• Exit Criteria: Stop-loss or next pattern.
• Stops: Yes, below pattern low.
• Default Values:
  • CandleType = 15 minute
  • StopLossPercent = 1
  • RequireDowntrend = true
  • DowntrendLength = 5
• Filters:
  • Category: Pattern
  • Direction: Long
  • Indicators: Candlestick
  • Stops: Yes
  • Complexity: Intermediate
  • Timeframe: Intraday
  • Seasonality: No
  • Neural networks: No
  • Divergence: No
  • Risk level: Medium