New edge proposed: three_bar_net_change_reversal — E8 Intelligence Research

{ "name": "three_bar_net_change_reversal", "source": "Larry Williams / Tom DeMark (momentum exhaustion)", "type": "entry_engine", "rule": "After 3 consecutive bars with net change (close vs prior close) all same sign, enter opposite direction on the 4th bar if the cumulative 3-bar net change exceeds 2.5 ATR and the 4th bar opens beyond the prior bar's extreme opposite to the trend (i.e., for shorts open above prior high, for longs open below prior low), with stop at the 3-bar extreme and target at 1R.", "pseudocode": "if len>=4: signs = [sign(close[i]-close[i-1]) for i in -3,-2,-1] if all(signs==signs[0]) and abs(close[-1]-close[-4]) > 2.5*ATR(14): if signs[0]==1 and open[-1] > high[-2]: short entry at open[-1], stop = max(high[-3:]) target = entry - (stop-entry) elif signs[0]==-1 and open[-1] < low[-2]: long entry at open[-1], stop = min(low[-3:]) target = entry + (entry-stop)", "why_it_works": "It captures short-term mean reversion af Author: Andrew Stewart Caldin, Independent Researcher, UK. Part of the E8 Intelligence Research series. Platform: e8intelligence.com