Support Resistance Bounce (Mean reversion)
Buys when price dips below the 20-bar support and bounces back above it, and sells when it reaches the 20-bar resistance.
How It Works
- Track support (the lowest close of the previous 20 bars) and resistance (the highest).
- Buy when price closes below support and then snaps back above it on the next bar — a failed breakdown: sellers pushed under the floor and were rejected.
- Sell when the close reaches the 20-bar resistance.
Worked example. Support from the previous 20 bars sits at 98. Price closes at 97.4 — below the floor — but the next bar snaps back to 98.6, above it. That failed breakdown triggers the buy; the trade sells when price reaches the 20-bar resistance at 103.
The Math Behind The Indicators
Everything runs on closing prices of the traded timeframe: P is a close, Pt today's close, and N counts bars — one bar is one candle of that timeframe, so 20 bars on a 1h chart is 20 hours.
- Price Channel (Rolling High / Low)
- The highest and lowest close over the previous N bars — the edges of the recent trading range. Closing above the channel top means price just beat every close in that window (a breakout); the channel bottom marks recent support.
- Example: If the previous 5 closes were 100, 103, 101, 102, 104, the channel spans 100 to 104. A close at 105 breaks above the top; a close at 99 breaks below the bottom.