New edge proposed: overnight_range_breakout_fade_third_touch — E8 Intelligence Research

{ "name": "overnight_range_breakout_fade_third_touch", "source": "Linda Raschke / Larry Connors (mean-reversion at prior extremes) and classic gap-fade literature", "type": "filter_flag", "rule": "If the current 5-minute bar's high/low is the third distinct touch of the previous day's high or low (within 0.25 ATR), and the bar fails to close beyond that level by 0.1 ATR, then flag a reversal fade of that extreme.", "pseudocode": "prev_high = prior_day.high; prev_low = prior_day.low;_count = 0; each bar b in current_day, if |b.high - prev_high| <= 0.25*ATR or |b.low - prev_low| <= 0.25*ATR: touch_count++; touch_count == 3 and current_bar.close is within 0.1*ATR inside prev_high/prev_low: flag = 'fade_extreme'; flag = 'no_trade';", "why_it_works": "Repeated tests of a prior extreme with failing closes show absorption of stop orders and mean-reversion tendency, especially in range-bound conditions." } Author: Andrew Stewart Caldin, Independent Researcher, UK. Part of the E8 Intelligence Research series. Platform: e8intelligence.com