Suppose there’s a person named Xiaoze. He watches $XTZ , ignores moving averages, and focuses only on the lows. If the lows of three consecutive, already-closed daily candles each fall below the previous day’s low, and the fourth candle closes bullish (with the close above the open), he buys at the fourth candle’s close, holds for four full days, then sells at the close of the fourth day. While he’s holding a position and on the day he sells, even if the same pattern appears again, he doesn’t open a new position.
I applied this rule to Binance spot XTZ/USDT daily candles that had closed, from August 17 to November 14 (UTC, 90 candles in total). The November 15 candle has not closed yet, so it wasn’t included.
Over those 90 days, the pattern appeared on 10 days, but following the rule, he actually made only 7 trades. When the pattern appeared on September 25 and November 4, he was still holding his previous position, so he didn’t open a new one. November 12 also met the criteria, but holding for another full four days would have gone beyond these 90 closed-candle observations, so it wasn’t counted.
For the first trade, the lows on August 28, 29, and 30 fell from 0.2158 to 0.2107, then to 0.2079. The August 31 candle closed bullish, so he bought at 0.2127. Four days later, on September 4, he sold at 0.2303, for an 8.27% gain. Xiaoze told a friend: “Three days probing lower, then a bullish close on the fourth—not bad.”
The turning point came after he sold. From his sale on September 4 to an intraday high of 0.3055 on September 13, the price rose 32.65% above his sale price. It also closed at 0.2839, up 23.27%. He was out of the market for those nine days.
Next, he waited until the lows on September 14, 15, and 16 fell each day, then the September 17 candle closed bullish, and he bought back in at 0.2548. This was the truly impressive trade: four days later, on September 21, he sold at 0.34, for a 33.44% gain. While he was holding, the price also reached the 90-day high of 0.4025 intraday on September 19, and closed at 0.3671. By the time he sold, the price had already pulled back from its intraday peak; that high was 18.38% above his sale price.
The next five trades contributed almost nothing overall:
Bought at 0.3315 on September 24, sold at 0.3132 on September 28, a 5.52% loss;
Bought at 0.3166 on September 30, sold at 0.3302 on October 4, a 4.30% gain;
Bought at 0.2986 on October 9, sold at 0.3229 on October 13, an 8.14% gain;
Bought at 0.2819 on October 28, sold at 0.2527 on November 1, a 10.36% loss—the worst trade;
Bought at 0.2475 on November 3, sold at 0.2599 on November 7, a 5.01% gain.
Across the seven trades, five were profitable and two lost money, for a compounded return of 44.92%. The first two trades were both profitable, and their compounded return had already reached 44.48%. The compounded return of the next five trades was just 0.31%. If you exclude the biggest winner, the 33.44% trade, the remaining six trades compounded to just 8.61%. Buying at the August 17 close of 0.1995 and holding until the November 14 close of 0.2121 would have returned 6.32%—less than Xiaoze’s strategy, but almost all of its 44.92% came from the first two trades. Over the same period, $BTC went from 64532.1 to 64150, down 0.59%, essentially flat.
The 90-day low was 0.195 on August 17. The November 14 close was 47.30% below the September 19 high, and the price would need to rise 89.77% to return to that peak.
Xiaoze made almost all of his gains for these 90 days in the first two trades; the next five were nearly flat overall. Over a different period, he might not have caught that September trade.
These are historical data for candles that have closed. They don’t indicate what will happen next, and this is not a recommendation to buy or sell. If you also waited for three days of lower lows before buying, would you care about the gains you missed during those nine days after selling?
I applied this rule to Binance spot XTZ/USDT daily candles that had closed, from August 17 to November 14 (UTC, 90 candles in total). The November 15 candle has not closed yet, so it wasn’t included.
Over those 90 days, the pattern appeared on 10 days, but following the rule, he actually made only 7 trades. When the pattern appeared on September 25 and November 4, he was still holding his previous position, so he didn’t open a new one. November 12 also met the criteria, but holding for another full four days would have gone beyond these 90 closed-candle observations, so it wasn’t counted.
For the first trade, the lows on August 28, 29, and 30 fell from 0.2158 to 0.2107, then to 0.2079. The August 31 candle closed bullish, so he bought at 0.2127. Four days later, on September 4, he sold at 0.2303, for an 8.27% gain. Xiaoze told a friend: “Three days probing lower, then a bullish close on the fourth—not bad.”
The turning point came after he sold. From his sale on September 4 to an intraday high of 0.3055 on September 13, the price rose 32.65% above his sale price. It also closed at 0.2839, up 23.27%. He was out of the market for those nine days.
Next, he waited until the lows on September 14, 15, and 16 fell each day, then the September 17 candle closed bullish, and he bought back in at 0.2548. This was the truly impressive trade: four days later, on September 21, he sold at 0.34, for a 33.44% gain. While he was holding, the price also reached the 90-day high of 0.4025 intraday on September 19, and closed at 0.3671. By the time he sold, the price had already pulled back from its intraday peak; that high was 18.38% above his sale price.
The next five trades contributed almost nothing overall:
Bought at 0.3315 on September 24, sold at 0.3132 on September 28, a 5.52% loss;
Bought at 0.3166 on September 30, sold at 0.3302 on October 4, a 4.30% gain;
Bought at 0.2986 on October 9, sold at 0.3229 on October 13, an 8.14% gain;
Bought at 0.2819 on October 28, sold at 0.2527 on November 1, a 10.36% loss—the worst trade;
Bought at 0.2475 on November 3, sold at 0.2599 on November 7, a 5.01% gain.
Across the seven trades, five were profitable and two lost money, for a compounded return of 44.92%. The first two trades were both profitable, and their compounded return had already reached 44.48%. The compounded return of the next five trades was just 0.31%. If you exclude the biggest winner, the 33.44% trade, the remaining six trades compounded to just 8.61%. Buying at the August 17 close of 0.1995 and holding until the November 14 close of 0.2121 would have returned 6.32%—less than Xiaoze’s strategy, but almost all of its 44.92% came from the first two trades. Over the same period, $BTC went from 64532.1 to 64150, down 0.59%, essentially flat.
The 90-day low was 0.195 on August 17. The November 14 close was 47.30% below the September 19 high, and the price would need to rise 89.77% to return to that peak.
Xiaoze made almost all of his gains for these 90 days in the first two trades; the next five were nearly flat overall. Over a different period, he might not have caught that September trade.
These are historical data for candles that have closed. They don’t indicate what will happen next, and this is not a recommendation to buy or sell. If you also waited for three days of lower lows before buying, would you care about the gains you missed during those nine days after selling?