This strategy trades based on inside bar breakdowns. If the high/low of the bar following an inside bar penetrates the prior inside bar’s range, trade signals are generated.
The logic is:
Check if the prior 2 bars formed an inside bar i.e. bar 2’s high/low within bar 1’s range
If bar 3 high exceeds bar 2 high, and closes above bar 2 low, go long
If bar 3 low breaks bar 2 low, and closes below bar 2 high, go short
Optionally close orders X bars later (e.g. 3 bars)
It aims to capture trends emerging from inside bar consolidations. Inside bars represent short-term balances, and breakdowns can kickstart new trends.
Inside bars easy to identify, breakdowns give clear signals
Closing orders early avoids whipsaws
Simple and intuitive rules
Need to further validate signal effectiveness
Inside bar formation and breakdowns less common
Could trade against major trend
This strategy attempts to capitalize on trends from inside bar breakdowns. But the lower frequency of trading needs evaluation of risk-reward. Combining with other factors could improve performance.
/*backtest
start: 2022-09-07 00:00:00
end: 2022-10-31 00:00:00
period: 4d
basePeriod: 1d
exchanges: [{"eid":"Futures_Binance","currency":"BTC_USDT"}]
*/
//@version=3
strategy("Inside Bar Failure", overlay=true)
forward = input(defval=3, title="Look Forward")
longCondition = if (high[2] > high[1] and low[2] < low[1] and low < low[1] and high < high[1] and close > low[1])
x = true
if (longCondition)
strategy.entry("Long", strategy.long)
shortCondition = if (high[2] > high[1] and low[2] < low[1] and high > high[1] and low > low[1] and close < high[1])
y = true
if (shortCondition)
strategy.entry("Short", strategy.short)
if (longCondition[forward])
strategy.close("Long")
if (shortCondition[forward])
strategy.close("Short")