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Educational only — not financial advice. The example is illustrative. The Strat is a price-action framework with limited independent evidence of edge; always define risk and test any process yourself.
Strategy Playbook · Price action

The Strat

Every candle is a 1, a 2, or a 3 — trade the break of the prior bar, with the higher timeframes in agreement.

Method from → Rob Smith · Concepts: Candlesticks, Trends

TypePrice-action method
BiasLong or short
TimeframeMulti-timeframe
StyleDiscretionary

1 The Edge — why it works

Every candle is a 1, a 2, or a 3

The Strat reduces all of price action to three objective candle scenarios and trades the precise moment a candle takes out the prior bar's high or low — an "actionable signal" — in agreement across timeframes.

By labelling every bar as a 1 (inside), 2 (directional, takes one side), or 3 (outside, takes both sides), it removes the ambiguity of subjective chart-reading and the clutter of indicators. The edge it claims is discipline and objectivity, not a secret signal.

2 Where it works — and doesn't

Alignment, not noise

Works best when…

  • The higher timeframes agree (Full Timeframe Continuity).
  • A clean, recognisable combo prints (2-1-2, 1-2-2, 3-1-2).
  • The signal triggers near a meaningful level or broadening edge.
  • You trade with the larger-timeframe direction.

Fails / avoid when…

  • Timeframes conflict — no FTFC.
  • You trade tiny inside bars on low timeframes alone.
  • You force a pattern that isn't really there.
  • Choppy, directionless conditions with no continuity.

3 Setup checklist

All true before you act

The Strat — entry combinations Every bar is a 1, 2, or 3. The actionable signal is the break of the prior bar — in the direction of higher-timeframe continuity. The three scenarios 1 = inside · 2 = takes one side · 3 = takes both 1 2U 2D 3 The 3 scenarios 2-1-2 reversal Up, inside, then down breaks the inside low 2U 1 2D Reversal ▸ break prior low → short 1-2-2 reversal Inside, down, then up breaks the down-bar high 1 2D 2U Reversal ▸ break prior high → long 3-1-2 reversal Outside bar, inside bar, then a directional break 3 1 2U Reversal ▸ break prior high → long 2-2 continuation Two directional bars the same way 2U 2U Continuation ▸ break prior high → long Broadening formation Higher highs and lower lows — expanding range 2U 3 3 2D Expansion Illustrative schematic. Bar colour marks scenario type; the dashed line marks the actionable trigger — the prior bar's high or low.
The core actionable combinations. A reversal needs a directional bar (2) that breaks the prior bar after a 1 or 3; a 2-2 keeps going the same way; a broadening formation is two-sided expansion. Always traded in the direction of Full Timeframe Continuity.

4 The process

From signal to managed trade

1

Entry

Enter on the actionable signal — the break of the prior bar's high (long) or low (short) — in the FTFC direction.

2

Stop (1R)

Beyond the trigger (or setup) bar's opposite extreme. Entry − that point = 1R.

1R = entry − stop
3

Position size

Risk a small fixed % of the account; shares = risk ÷ 1R.

shares = (account × risk%) ÷ 1R
4

Exit & management

Target the next timeframe's level or a measured objective; exit if an opposite actionable signal prints against you.

5 Worked example (illustrative)

A 2-1-2 reversal, in R

The Strat — every candle is a 1, 2, or 3 (here: a 2-1-2 reversal)2U2U12D2D2D▲ actionable signal: breaks prior bar low1 = inside · 2 = directional · 3 = outside
Illustrative. Two up bars (2U), an inside bar (1), then a down bar that breaks the inside bar's low (2D) — the 2-1-2 reversal. The break of the prior bar is the actionable signal; the stop sits beyond the setup.
Account / risk per trade$25,000 · 1% = $250
Entry (2D breaks prior bar low)$101.40
Stop (above the inside-bar high) — 1R$107.60 · 1R = $6.20/share
Position size = $250 ÷ $6.20≈ 40 shares
Target (next lower timeframe level, +2R)$89.00
If it works: +2R+ $500 (≈ +2.0%)
If it fails: −1R− $250 (≈ −1.0%)

6 Honest expectancy

A discipline, not a guaranteed edge

The Strat is best understood as a consistent vocabulary and discipline for reading price across timeframes — not a statistically proven system. Its core trigger (a break of the prior bar) is the same logic many price-action methods use, and its devoted community is enthusiasm, not evidence. There is little independent, rigorous proof that it outperforms other disciplined approaches.

expectancy (in R) = (win% × avg win) − (loss% × avg loss)

Whatever edge exists comes from selectivity, timeframe alignment, and risk control — not the labels themselves. An expectation, never a guarantee.

7 Make it yours

Test before you trade

A no-risk validation routine

Practise labelling every candle as a 1, 2, or 3 on historical charts until it's automatic. Then take only FTFC-aligned reversal combos (2-1-2, 1-2-2) in replay, marking the actionable-signal entry, the beyond-the-bar stop, and the result in R — before checking the outcome. Notice how filtering for Full Timeframe Continuity changes the hit rate.

8 Common mistakes

How traders blow this up