3-Bar Reversal Detection

 Multi-Candle Pattern + ATR Trailing Strategy
This strategy identifies potential short-term reversals using a 4-candle price pattern: 3 consecutive candles in the same direction followed by a strong reversal signal. It combines classic price action logic with ATR-based trailing exits for dynamic profit locking.

Core Logic:
Reversal Pattern Structure:

Bullish Setup:
3 consecutive bearish candles, followed by 1 strong bullish candle

Bearish Setup:
3 consecutive bullish candles, followed by 1 strong bearish candle

Candle Strength Filter:
The 4th candle must have a body size greater than a specified minimum % threshold (default: 3%) relative to the open price — helping to eliminate weak or indecisive reversals.

Entry Logic:
Long Entry:
After 3 red candles, if a strong green candle appears that meets the body size criteria → enter long.

Short Entry:
After 3 green candles, if a strong red candle appears → enter short.

The strategy does not require prior trend confirmation and is designed to operate in choppy or swing environments.

 Exit Strategy – ATR-Based Dynamic Trailing:

ATR (Average True Range) is used to:  Define when to start trailing (e.g., price has moved 1.5×ATR in favor)  Dynamically adjust the trailing stop at a configurable offset (e.g., 1.0×ATR) behind recent highs/lows  This enables smart, adaptive exits that respond to volatility while preserving profits.  

Visual Cues:

Bullish reversals plotted with green triangle (below bar)  Bearish reversals plotted with red triangle (above bar)  Cleanly coded without requiring exotic chart types.  

Strategy Parameters:

Min Body Size (%): Filters low-conviction candles  ATR Length: For trailing range and volatility adaptation  Pyramiding: Up to 5 entries allowed  Commission: Includes realistic 0.05% fee simulation.

  Suggested Use:

Best used on 15m, 1h, or 4h charts for crypto, forex, or indices. Suitable for mean-reverting or swing conditions, not optimized for fast breakouts or strong trending environments.  

Final Notes:

The 3-bar reversal is a well-known price action pattern, but its effectiveness varies depending on volatility, time of day, and asset class. Always validate with backtesting and forward analysis.  Note: Different assets may require specific parameter adjustments. Users are responsible for optimizing the strategy settings for the asset they trade. Please ensure you fine-tune the parameters according to your trading pair.