Island Top
BearishReversalIntermediateA gap up, a few stranded candles at the top, then a gap down below them.
Verdict: UseBitcoin 4H: 0 trades, won —, avg trade — vs random day — (too few trades to judge). Backtest
Price is climbing. Then it opens above the last candle's high and leaves a hole in the chart. A gap up.
step 1/7
Trade rules
| Direction | Short (sell) |
|---|---|
| Entry | After a rally: a gap up, 1 to 10 candles that never fill it, then a gap down below all of them. A candle CLOSES below the gap-down candle's low within 3 candles. |
| Cancelled if | Price trades back into the island (above the bottom 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.
- Shorting the gap-down open instead of waiting for a close below that candle's low.
- Putting the stop inside the gap, where normal noise takes it out.
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 | 51 | 59% | +0.76% | −1.18% |
Verdict: UseMade money and beat a random entry on US large caps. Bitcoin had too few signals to judge.
pattern +39%random −60%