Count the key reversal up before coding a mechanical exit

Study raw OHLC first

The construction sequence studies raw OHLC bar structure before any moving-average or oscillator transform is used as a forecast input. Editorial note: that order keeps the candle as a condition to count, not as a forecast already in hand.

A key reversal up is specified as a lower low than the prior bar, a higher close than the prior close, and a close that is not the same bar's high. The bar undercuts the prior low, closes above the prior close, and does not close on its own high.

Write a pattern function, then count

The pattern is first written as a reusable condition so occurrences can be counted and so the share of cases where the next high is at or above the prior high can be measured. That reusable condition is the pattern function.

The next-bar high test is the count of how often the bar after the reversal prints a high at or above the reversal bar high.

Repeat a multi-market census

The multi-market census is to be repeated on at least 10 to 15 noncorrelated markets. A setup is treated as a system candidate only if it remains valid in more than six or seven of them.

Across the tabulated markets the reversal appeared on 8.51% of bars on average, and the next-high condition held on 70.71% of those occurrences.

Lock one short-horizon mechanical procedure

The mechanical long rule buys the close of the qualifying bar and places a next-bar exit at that bar's high. That mechanical procedure states when to enter, when to take the prior-high exit, when to stop out, and when to stand aside.

Editorial note: when the pattern function is not present, the procedure stands aside rather than forcing a trade.

Attach a fixed stop-loss at entry

The coded test attaches a $250 fixed stop-loss at entry and omits slippage and commissions from the procedure. A fixed stop-loss is a cash loss bound attached at entry rather than a volatility-scaled exit.

The cash stop is described as lowering the win rate relative to the raw next-high census. A volatility-based stop is offered as a later refinement of the risk bound rather than of the candle rule.