CTS-3-Candles Trading Strategy: Master System Manual

CTS-3-Candles Trading Strategy: Master System Manual

Updated Specification: 3G/3R Pattern Uses the 3rd (Last) Candle as the Signal Candle

SYSTEM ARCHITECTURE FLOWCHART ┌────────────────────────────────────────────────────────────────────────┐ │                        D1: TREND & MACRO S/R                           │ │  ► Trend Filter: 3 Consecutive Green (Buy) / 3 Consecutive Red (Sell)  │ │  ► Macro Levels: 4 Lines (2 most recent HLs + 2 most recent LHs)       │ └───────────────────────────────────┬────────────────────────────────────┘                                     │                                     ▼ ┌────────────────────────────────────────────────────────────────────────┐ │                   H4: STRUCTURE, CONFIRMATION & REVERSAL               │ │  ► Intermediary Levels: 4 Lines (2 recent HLs + 2 recent LHs)          │ │  ► Dynamic Levels: EMA 9, EMA 14, EMA 60                               │ │  ► Total Levels Monitored: 8 Static (4 D1 + 4 H4) + 3 Dynamic EMAs     │ │  ► Patterns: Pin Bar | Engulfing | Fakey | 3G / 3R                     │ ├───────────────────────────────────┬────────────────────────────────────┤ │  OPPOSING PATTERN:                │  ALIGNED PATTERN:                  │ │  ► REVERSAL TRIGGER               │  ► TREND CONFIRMED                 │ │  ► Immediately exit ALL orders    │  ► Unlock H1 execution window      │ └───────────────────────────────────┴─────────────────┬──────────────────┘                                                       │                                                       ▼ ┌────────────────────────────────────────────────────────────────────────┐ │                        H1: PRECISION EXECUTION                         │ │  ► Patterns: Pin Bar | Engulfing | Fakey | 3G / 3R                     │ │  ► Signal Candle: 3rd Candle of 3G/3R, False Breakout of Fakey, etc.   │ │  ► Entry: Buy/Sell Limit at 50% Retracement of Signal Candle           │ │  ► Stop Loss: Beyond Signal Candle extreme + Buffer                    │ │  ► Take Profit: 3.618 Fibonacci Extension of Signal Candle             │ └────────────────────────────────────────────────────────────────────────┘

 

1. The 8 Static S/R Lines + Dynamic EMAs

You plot exactly 8 structural horizontal levels across D1 and H4 swing points:

STRUCTURAL LEVEL MAPPING [RESISTANCE] ─── Line 4: D1 Lower High 2 (D1 LH2) [RESISTANCE] ─── Line 3: D1 Lower High 1 (D1 LH1) [RESISTANCE] ─── Line 8: H4 Lower High 2 (H4 LH2) [RESISTANCE] ─── Line 7: H4 Lower High 1 (H4 LH1) ─────────────────────────────────────────────────── (CURRENT PRICE ACTION) [SUPPORT]    ─── Line 5: H4 Higher Low 1 (H4 HL1) [SUPPORT]    ─── Line 6: H4 Higher Low 2 (H4 HL2) [SUPPORT]    ─── Line 1: D1 Higher Low 1 (D1 HL1) [SUPPORT]    ─── Line 2: D1 Higher Low 2 (D1 HL2)

 

·         D1 Macro Levels (4 lines):
  • 2 Higher Lows (HL): Major Macro Support floors.
  • 2 Lower Highs (LH): Major Macro Resistance ceilings.

·         H4 Intermediary Levels (4 lines):
  • 2 Higher Lows (HL): Intermediate Support zones.
  • 2 Lower Highs (LH): Intermediate Resistance zones.

·         H4 Dynamic Support/Resistance: EMA 9, EMA 14, EMA 60.

2. Multi-Timeframe Rules: D1 & H4

Step 1: D1 Trend Filter

·         Bullish (Buy Only): 3 consecutive daily green candles (Close > Open).

·         Bearish (Sell Only): 3 consecutive daily red candles (Close < Open).

·         Neutral: Any mixed sequence breaks the trend filter → No new entries permitted.

Step 2: H4 Confirmation vs. Reversal

Watch the reaction when price tests any of the 8 Static Lines or EMAs (9, 14, 60):

·         Approved PA Patterns: Pin Bar, Engulfing Bar, Fakey, or 3G/3R.

·         Trend Confirmed: PA forms in the same direction as the D1 3-candle trend. → Proceed to H1.

·         Reversal Trigger: PA forms in the opposite direction of the D1 trend (e.g., Bearish pattern at resistance during a D1 Bullish trend). → Immediately exit all active market orders at market price and cancel all pending limit orders.

3. H1 Timeframe: Signal Candle Definitions

On H1, wait for an approved PA pattern in the confirmed direction. Every pattern is reduced to a single Signal Candle for order placement:

Pattern Type	Which Candle is the "Signal Candle"?	High_sig	Low_sig
Pin Bar	The Pin Bar itself	High of the candle	Low of the candle
Engulfing Bar	The Engulfing Bar itself	High of the candle	Low of the candle
Fakey	The False Breakout Candle	High of the false break bar	Low of the false break bar
3G (3 Green)	The 3rd (Last) Green Candle	High of Candle 3	Low of Candle 3
3R (3 Red)	The 3rd (Last) Red Candle	High of Candle 3	Low of Candle 3

 

H1 3G PATTERN RETRACEMENT MODEL H1 3G Pattern (Buy Setup)                   ┌───┐ ◄── High_sig (Candle 3)                 │   │                 │   │ ◄── 50% RETRACEMENT (BUY LIMIT)                 └───┘ ◄── Low_sig (Candle 3, SL below here)         ┌───┐         │   │         └───┘ (Candle 2) ┌───┐ │   │ └───┘ (Candle 1)   Range = High_sig - Low_sig Buffer = Spread + 2 to 5 pips

 

4. Execution Rules (Entry, SL, and TP Formulas)

A. Long Setup (Buy) — Pin Bar, Engulfing, Fakey, or 3G

LONG EXECUTION DIAGRAM ┌────── Take Profit (TP): Low_sig + (Range × 3.618) │ │ High_sig ──┬───────┤            │       │ 50% Retr ──┼───────┴────── BUY LIMIT ENTRY: High_sig - (Range × 0.5)            │  Low_sig ──┴────────────── STOP LOSS (SL): Low_sig - Buffer

 

·         1. Entry Order: Place a Buy Limit at the 50% retracement of the Signal Candle (Candle 3 for 3G):

Entry Price = High_sig - (0.50 × Range) = (High_sig + Low_sig) / 2

·         2. Stop Loss (SL):

SL = Low_sig - Buffer

·         3. Take Profit (TP): Target the 3.618 extension of the Signal Candle:

TP = Low_sig + (Range × 3.618)

B. Short Setup (Sell) — Pin Bar, Engulfing, Fakey, or 3R

SHORT EXECUTION DIAGRAM  High_sig ──┬────────────── STOP LOSS (SL): High_sig + Buffer             │ 50% Retr ───┼───────┬────── SELL LIMIT ENTRY: Low_sig + (Range × 0.5)             │       │   Low_sig ──┴───────┤                     │                     │                     └────── Take Profit (TP): High_sig - (Range × 3.618)

 

·         1. Entry Order: Place a Sell Limit at the 50% retracement of the Signal Candle (Candle 3 for 3R):

Entry Price = Low_sig + (0.50 × Range) = (High_sig + Low_sig) / 2

·         2. Stop Loss (SL):

SL = High_sig + Buffer

·         3. Take Profit (TP): Target the 3.618 extension of the Signal Candle:

TP = High_sig - (Range × 3.618)

5. Capital & Risk Management Protocol

Entering at 50% of the 3rd candle provides a tight invalidation level with an effective 1:5 to 1:7 Risk-to-Reward ratio.

·         1. Position Sizing (1.0% – 1.5% Risk per Trade):

Lot Size = (Account Balance × Risk %) / (|Entry Price - SL| × Pip Value)

·         2. Order Expiration:
If price does not retrace to fill your 50% limit order within 2 to 3 H1 candles, and instead breaks out beyond the Signal Candle extreme, cancel the limit order.

·         3. Breakeven (BE) Shift:
Move Stop Loss to Entry + Spread once price reaches the 1.618 Fibonacci level of the Signal Candle.

·         4. Emergency Reversal Override:
If an opposing H4 PA pattern closes at any of the 8 lines or EMAs, exit all active trades immediately at market price. Do not wait for the H1 Stop Loss to be hit.