Reversal Candlestick Patterns

The Reversal Candlestick Patterns indicator identifies ten classic candlestick reversal patterns while providing market context filtering to enhance signal reliability. By analyzing candle structure, proximity to local extremes, and trend direction, the tool highlights potential turning points directly on the chart with customizable visual blocks.

Usage

The tool can be used to spot reversal opportunities in both bullish and bearish market conditions. Users can choose to enable or disable specific patterns to clean up the chart or focus on preferred setups.

The indicator identifies the following patterns:

• Bullish Patterns: Bullish Engulfing, Morning Star, Hammer, Inverted Hammer, and Three White Soldiers.
• Bearish Patterns: Bearish Engulfing, Evening Star, Hanging Man, Shooting Star, and Three Black Crows.

For higher probability setups, the "Check Trend" filter ensures that bullish patterns are only identified in downtrends (suggesting a bottom) and bearish patterns in uptrends (suggesting a top). Additionally, users can link external indicators via the External Filters section to require specific oscillator or volume conditions before a pattern is confirmed.

Details

The detection logic utilizes several key components:

• Price Action Context: Patterns are validated based on their position relative to recent highs and lows (local extremes).
• Trend Filtering: A dual Simple Moving Average (SMA) system determines the trend. The "Trend Detection Length" controls the sensitivity of the fast SMA, the slow SMA, and the number of bars required to confirm a trend direction.
• Volatility-Based Offsets: The visual boxes use ATR-based offsets to ensure labels remain clear regardless of the asset's current volatility.

Settings

Bullish / Bearish Patterns

• Enable Pattern: Toggle detection for each individual candlestick pattern.
• Short Name: Define the character or abbreviation displayed on the chart.
• Color: Customize the color for the highlighting block.

Trend Filter

• Check Trend: Enables a moving average-based filter to ensure patterns align with the broader market context.
• Trend Detection Length: Sets the lookback period for trend confirmation and SMA calculations.

External Filters

• Bull/Bear Filter: Toggles the requirement for an external source value to be "true" (non-zero) for pattern confirmation.
• Filter Source: Select the output of another indicator to act as an additional confluence layer.

Visual

• Show Names: Toggles the display of pattern labels.
• Fill Transparency: Adjusts the opacity of the visual highlight blocks.
• Text Size: Controls the font size of pattern labels.

FAQ

How do I access Reversal Candlestick Patterns?

You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.

Can I set alerts for specific patterns?

Yes, the script supports individual alerts for every pattern, as well as global alerts for "Any Bullish" or "Any Bearish" detections.

Why didn't a pattern show up even though it looks correct?

The indicator uses strict logic regarding body size relative to the average and position relative to local extremes. If "Check Trend" is on, it may also filter out patterns that appear against the calculated trend direction.

Disclaimer: Candlestick patterns should not be used as standalone trading signals. This indicator is intended to be used as part of a broader analysis, together with trend structure, key levels, volume, and other analytical tools.