V-Bottom

BullishReversalIntermediate

A crash, then an instant rebound. No base, no waiting.

Verdict: SkipBitcoin 4H: 20 trades, won 40%, avg trade −2.2% vs random day +0.3%. Backtest

Drop starts
V-Bottom: textbook shape, step by step

Price drops hard and fast. Each little bounce gets sold.

step 1/6

Trade rules

DirectionLong (buy)
EntryAfter a fast drop from a swing high (8%+ on Bitcoin, 10%+ on stocks, at least half an average candle range per candle), the first CLOSE above the last small lower high of the drop, coming no slower than the fall from that high to the low (3 candles minimum).
Cancelled ifA recovery slower than that, or a new high above where the drop started, cancels it.
TargetBack to the top, projected from the breakout
3 common mistakes
  • Buying the first green candle of the crash: that is catching a falling knife.
  • Waiting for a base: a V has none, so the signal is a close above the last lower high.
  • Slow recoveries: if the bounce takes longer than the fall, it is not a V.

Backtest

same rules every time · equal size · no fees · method
MarketTradesWonAvg tradeRandom day
Bitcoin · 4H · 2017-20262040%−2.20%+0.34%
US large caps (50) · 1D · 2016-202621854%+0.27%+1.37%

Verdict: SkipNever beat a random entry, and lost money in some markets.

pattern −44%random +6.8%
Bitcoin 4H: pattern −44% vs random day +6.8% over 20 trades
pattern +58%random +298%
US large caps (50) 1D: pattern +58% vs random day +298% over 218 trades

Real examples

Bitcoin · 4H

Breakout Mar 20, 2024, exit Mar 20, 2024 (target)+3.39%
TriggerWhere it startedDrop starts65,756 · Mar 19, 2024Last lower high63,466 · Mar 20, 2024V low60,775 · Mar 20, 2024Confirmed
Bitcoin 4H, real candles from Mar 19, 2024

Goldman Sachs · 1D

Breakout Jan 26, 2023, exit Feb 3, 2023 (target)+5.46%
TriggerWhere it startedDrop starts374.35 · Jan 13, 2023Last lower high354.79 · Jan 18, 2023V low336.16 · Jan 23, 2023Confirmed
Goldman Sachs 1D, real candles from Jan 13, 2023

Adobe · 1D

trapBreakout Mar 2, 2020, exit Mar 9, 2020 (stop)−10.86%
TriggerDrop starts386.75 · Feb 20, 2020Last lower high360.07 · Feb 26, 2020V low324.00 · Feb 28, 2020Confirmed
Adobe 1D, real candles from Feb 20, 2020