3LS | 3 Line Strike Strategy [Kintsugi Trading]

This trading strategy operates on a 3-line strike pattern recognition in combination with Volume Spread Analysis (VSA) and multiple moving averages (MAs) to determine trade entries. Long positions are taken when there's a bearish-to-bullish engulfing pattern with increasing volume and if the fast MA is above the slow MA, whereas short positions are initiated under the opposite conditions. The strategy can be adjusted for risk management and includes session filters to limit trading during certain hours.

To trade this strategy manually on TradingView:

• Identify a 3-line strike pattern: 3 consecutive candles of the same color followed by an engulfing candle of the opposite color.
• Confirm the volume using Volume Spread Analysis (VSA): Volume should be higher than the average calculated with specific multipliers (0.5x, 1.5x, 3x). Plot volume and its MA on the chart and look for volume above the second multiplier.
• Use two moving averages with periods you can set (default is 21 for fast and 55 for slow). The fast MA should be above the slow MA for a long position, and below for a short position.
• Establish entry conditions:
  • For a long entry: a bullish 3-line strike pattern, volume above the second MA multiplier, and a fast MA above the slow MA.
  • For a short entry: the reverse conditions with a bearish 3-line strike pattern.
• Determine the stop-loss and take-profit:
  • The stop-loss can be set at a fixed PIP size below the low (for long) or above the high (for short) of the entry candle or using the ATR with a custom multiplier.
  • Take-profit can be set using a risk/reward ratio based on the distance of stop-loss from entry.
• Use session filters if you wish to trade only during certain hours – incorporate the session times according to your trading plan.
• Monitor your positions and manually close them according to the defined exit criteria or when the ATR trailing stop is hit if you opted for that type of stop-loss

Improving the 3LS | 3 Line Strike Strategy for manual trading involves refining the decision-making process, entry and exit points, and risk management structures. Here's a meticulous plan to enhance this trading method:

• Pattern Recognition: Deepen your understanding of the 3-line strike pattern. Study historical charts to identify common characteristics of patterns that lead to profitable trades. Record the findings to develop a filter that distinguishes high-probability setups from false signals.
• Volume Analysis: Integrate more sophisticated VSA techniques. Instead of relying solely on volume being above a simple moving average, consider volume spikes relative to recent past, and divergences between price and volume which often precede reversals.
• Moving Averages Optimization: Experiment with different lengths for the fast and slow MAs based on the asset’s volatility and your trading timeframe. Utilize exponential moving averages (EMAs) for a more responsive approach to trends in highly volatile markets.
• Time your trades: Use the session filters to align with the most liquid times for the asset class you are trading. Liquidity is crucial for pattern effectiveness and slippage minimization, leading to better trade execution.
• Additional Confluences: Seek further technical confluences such as support/resistance levels, Fibonacci retracements, or RSI divergence. Confirming a 3-line strike pattern around key levels or divergences can substantially increase trade success rates.
• Manual Stop Adjustments: Rather than using a fixed Risk/Reward ratio, customize the take-profit and stop-loss levels based on evolving market conditions. Consider implementing trailing stops once in profit to capture larger moves while protecting gains.
• Psychology and Discipline: Adherence to the trading plan is vital. Keep a trading journal documenting each trade’s premise, management, and outcome, thus ensuring a disciplined approach and valuable hindsight for continual improvement.
• Continuous Backtesting: Test your modified strategy against historical data. An iterative backtesting process helps affirm strategy enhancements and their impact on the risk/reward profile before implementation in live markets.
• Market Feedback: Monitor feedback from your trades to make continuous adjustments. No strategy is static; markets evolve and a trader must adapt their approach accordingly, while keeping alteration grounded in statistical feedback and not on impulse.

The 3LS | 3 Line Strike Strategy is tailored for traders who appreciate technical analysis and pattern recognition, particularly those comfortable with interpreting candlestick formations. It's suitable for:

• Swing and Day Traders: The strategy's reliance on specific candlestick patterns and volume analysis fits well with the more hands-on approach of swing and day trading where quick decision-making and trade turnover are common.
• Traders with a focus on Trend Continuation: This method serves those looking to capitalize on the power of trend continuation patterns, indicating its appropriateness for traders who operate with a trend-following mindset.
• Tech-Savvy Traders: Although it can be executed manually, the strategy also integrates auto-trading setups, making it appealing for those who are inclined towards market technologies and automated systems.

This strategy aligns with a rigorous risk management style, incorporating stop-loss strategies and risk/reward ratios, indicating its compatibility with disciplined traders who prioritize capital protection.

• Strategy Essence: Utilizes the 3-line strike candlestick pattern combined with volume analysis and moving averages to identify trending opportunities.
• Operational Method: Traders use specific stop-loss strategies and risk/reward ratios to manage trades, with options to filter trades by session times.
• Automation Potential: System supports automated trading through platforms like AutoView and PineConnector, using predefined alerts for entry and exit.
• Manual Trading Adaptability: While automation is an option, traders can enhance the strategy by manually refining entry/exit points, adding technical confluences, and adjusting stops based on the market context.
• Strategy Optimization: Continuous backtesting and adjustment of the moving average periods, VSA settings, and real-time trade management can improve performance.
• Risk Management Focus: Emphasis on careful risk assessment, using either a percentage of the account balance or a predefined risk amount per trade to maintain strategy efficacy.