This document will test one of the best known pattern: the 3 bars reversal setup. In particular the pattern is searched for intraday bars and if a setup is found, a BUY order is triggered. Only long trades are covered in this study, not shorts.

RULES FOR LONG
1. Bar 1 closes down
2. Low of Bar 2 is below low of Bar 1 (and Bar 3)
3. High of Bar 2 is below high of Bar 1
4. Bar 3 closes above the high of both Bar 1 and Bar 2
5. Buy at close of Bar 3

The asset used for the simulation is the SP&500 index future, with 5 minutes bars.

All the simulations include a slippage of 0 basis points for each roundturn (open - close trade).

Simulation 1.

Each trade is managed with a trailing stop set to the previous low. The slippage for each roundturn is 0 points.

Simulation 2.

Each trade is managed with a stop level, set upon the volatility of the last 68 bars. The slippage for each roundturn is 0 points.

Simulation 3.

Each trade is managed with a fixed stop level of -3 points. The slippage for each roundturn is 0 points.