Island Bottom
BullishReversalIntermediateA gap down, a few lonely candles, then a gap up that leaves them stranded.
Verdict: UseBitcoin 4H: 0 trades, won —, avg trade — vs random day — (too few trades to judge). Backtest
Price is falling. Then it opens below the last candle's low and leaves an empty space on the chart. That's a gap down.
step 1/7
Trade rules
| Direction | Long (buy) |
|---|---|
| Entry | After a decline: a gap down, 1 to 10 candles that never fill it, then a gap up above all of them. A candle CLOSES above the gap-up candle's high within 3 candles. |
| Cancelled if | Price trades back into the island (below the top of the island) before that close. |
| Target | Island height, projected from the breakout |
3 common mistakes
- Calling any two gaps an island: the second gap must clear every island candle.
- Buying the gap-up open instead of waiting for a close above that candle's high.
- Looking for islands on Bitcoin: a market that trades 24/7 almost never gaps.
Backtest
same rules every time · equal size · no fees · method| Market | Trades | Won | Avg trade | Random day |
|---|---|---|---|---|
| Bitcoin · 4H · 2017-2026 · too few trades to judge | 0 | — | — | — |
| US large caps (50) · 1D · 2016-2026 | 71 | 63% | +1.18% | +0.84% |
Verdict: UseMade money and beat a random entry on US large caps. Bitcoin had too few signals to judge.
pattern +84%random +60%