Suppose there’s someone named Xiaohang who drives a tow tractor at an airport cargo terminal. On August 17, $AERO opened at 0.4061. Old Zhou in the break room said, “If you buy, just leave it there. Don’t change your mind every day while staring at the candlesticks.” Xiaohang made himself a different rule: whenever the previous day’s close was down 3% or more from the close before that, and the next day closed higher than it opened, closed above the previous day’s close, and closed above the midpoint of the previous day’s high and low, he would buy 1000 USDT at that day’s close. Then he would count forward four closed daily candles and sell at that day’s close. If he hadn’t sold the previous position yet, he’d skip any new signal.
I applied this rule to Binance spot AERO/USDT closed daily candles from August 17 to November 14 (UTC, 90 candles in total). The November 15 candle hadn’t closed yet, so I left it out. The first two candles weren’t enough to evaluate: there was no previous close to compare with for the first, and for the second, the prior day still had no earlier close against which to measure a drop. That left 88 days that could be evaluated.
There were 89 days with a previous close to compare against, and on 27 of them the close was down 3% or more. One of those 27 days was November 14, and the following candle hadn’t closed yet, so I didn’t use it to assess the next day. Of the remaining 26, the next day met the rebound rule just 5 times; on the other 21 occasions, it didn’t rebound enough. None of the 5 signals came while the previous position was still open, and every scheduled sell day had closed, so all 5 trades were completed: 4 winners and 1 loser. No two trades overlapped on the same day. After cycling 1000 USDT through 5 trades, the balance ended at 1498.73, a cumulative gain of 49.87%, or an average gain of 8.85% per trade. The first 3 trades all gained, bringing the cumulative return to +55.54% and the balance to 1555.37. The fourth trade lost 4.03%, bringing the balance back to 1492.75. The fifth gained 0.40%, ending at 1498.73. The best trade was buying at the September 16 close of 0.5491 and selling at 0.6587 on September 20, for +19.96%. The worst was buying at the October 10 close of 0.9413 and selling at 0.9034 on October 14, for -4.03%.
If Old Zhou had bought at the open on August 17 and held until the November 14 close of 0.4321, his 1000 USDT would have become 1064.02, a gain of 6.40%. Over the same period, $BTC was up 1.99% from the August 17 open to the November 14 close.
The turning point came in that worst trade. October 10 was a rebound after the previous day had fallen 3.66%. It closed at 0.9413, up 17.56% from the prior close, so Xiaohang bought in according to his rule. The next day, October 11, the price reached an intraday high of 0.9934 and closed at 0.944, the highest high and highest close of those 90 days. Xiaohang was still holding: he had just bought on October 10 and wouldn’t sell until October 14. Based on his October 10 purchase price, his balance briefly reached 1641.46 intraday (an unrealized gain of 5.53% over his purchase price), and was still 1559.83 at the close (+0.29%). He sold at the October 14 close for a balance of 1492.75, down 9.06% from the October 11 high. Old Zhou’s balance could have reached 2446.20 intraday on October 11 (+144.62%), and was still 2324.55 at the close (+132.46%). From that peak to the November 14 close, it fell 56.50%; it would need to rise 129.90% to recover, and 34 days had passed.
The November 13 close was down 10.16% from November 12, meeting the “down 3% or more” condition. On November 14, the price opened at 0.4691 and closed at 0.4321, forming a bearish candle. It was also down 7.81% from the November 13 close of 0.4687, and didn’t close above the previous day’s midpoint of 0.49245, so Xiaohang didn’t buy. The November 14 intraday low of 0.4186 wasn’t the lowest of the 90 days; that was 0.3987 on August 19.
Old Zhou held all the way through and is still a little above his initial investment. Xiaohang won on 4 of his 5 trades, with 1 purchase made near the highest close, yet in the end he still came out well ahead of simply holding. These are historical data from closed candles; they don’t indicate what will happen next and aren’t investment advice. If you had to choose between buying after a previous-day drop of 3% or more, waiting for the next day to rebound above the midpoint, then holding for 4 days, or simply holding all the way through, which side would you take?
I applied this rule to Binance spot AERO/USDT closed daily candles from August 17 to November 14 (UTC, 90 candles in total). The November 15 candle hadn’t closed yet, so I left it out. The first two candles weren’t enough to evaluate: there was no previous close to compare with for the first, and for the second, the prior day still had no earlier close against which to measure a drop. That left 88 days that could be evaluated.
There were 89 days with a previous close to compare against, and on 27 of them the close was down 3% or more. One of those 27 days was November 14, and the following candle hadn’t closed yet, so I didn’t use it to assess the next day. Of the remaining 26, the next day met the rebound rule just 5 times; on the other 21 occasions, it didn’t rebound enough. None of the 5 signals came while the previous position was still open, and every scheduled sell day had closed, so all 5 trades were completed: 4 winners and 1 loser. No two trades overlapped on the same day. After cycling 1000 USDT through 5 trades, the balance ended at 1498.73, a cumulative gain of 49.87%, or an average gain of 8.85% per trade. The first 3 trades all gained, bringing the cumulative return to +55.54% and the balance to 1555.37. The fourth trade lost 4.03%, bringing the balance back to 1492.75. The fifth gained 0.40%, ending at 1498.73. The best trade was buying at the September 16 close of 0.5491 and selling at 0.6587 on September 20, for +19.96%. The worst was buying at the October 10 close of 0.9413 and selling at 0.9034 on October 14, for -4.03%.
If Old Zhou had bought at the open on August 17 and held until the November 14 close of 0.4321, his 1000 USDT would have become 1064.02, a gain of 6.40%. Over the same period, $BTC was up 1.99% from the August 17 open to the November 14 close.
The turning point came in that worst trade. October 10 was a rebound after the previous day had fallen 3.66%. It closed at 0.9413, up 17.56% from the prior close, so Xiaohang bought in according to his rule. The next day, October 11, the price reached an intraday high of 0.9934 and closed at 0.944, the highest high and highest close of those 90 days. Xiaohang was still holding: he had just bought on October 10 and wouldn’t sell until October 14. Based on his October 10 purchase price, his balance briefly reached 1641.46 intraday (an unrealized gain of 5.53% over his purchase price), and was still 1559.83 at the close (+0.29%). He sold at the October 14 close for a balance of 1492.75, down 9.06% from the October 11 high. Old Zhou’s balance could have reached 2446.20 intraday on October 11 (+144.62%), and was still 2324.55 at the close (+132.46%). From that peak to the November 14 close, it fell 56.50%; it would need to rise 129.90% to recover, and 34 days had passed.
The November 13 close was down 10.16% from November 12, meeting the “down 3% or more” condition. On November 14, the price opened at 0.4691 and closed at 0.4321, forming a bearish candle. It was also down 7.81% from the November 13 close of 0.4687, and didn’t close above the previous day’s midpoint of 0.49245, so Xiaohang didn’t buy. The November 14 intraday low of 0.4186 wasn’t the lowest of the 90 days; that was 0.3987 on August 19.
Old Zhou held all the way through and is still a little above his initial investment. Xiaohang won on 4 of his 5 trades, with 1 purchase made near the highest close, yet in the end he still came out well ahead of simply holding. These are historical data from closed candles; they don’t indicate what will happen next and aren’t investment advice. If you had to choose between buying after a previous-day drop of 3% or more, waiting for the next day to rebound above the midpoint, then holding for 4 days, or simply holding all the way through, which side would you take?