Reversal Points

The Reversal Points indicator provides a multi-layered approach to identifying market pivots by categorizing price reversals into short, mid, and long-term cycles. This tool helps traders visualize potential trend changes and find optimal entry or exit points across various timeframes.

Usage

The script identifies three tiers of market reversals:

• Short Term: Identified when a low is surrounded by higher lows or a high is surrounded by lower highs. These are the most frequent signals.
• Mid Term: Formed when a short-term high/low is surrounded by lower/higher short-term highs/lows. These signals represent more significant pivot points.
• Long Term: Formed when a mid-term high/low is surrounded by lower/higher mid-term highs/lows. These are the rarest and typically signal major trend shifts.

Traders can use long-term points for primary trend direction (buying at long-term lows or selling at long-term highs) while using short and mid-term points for refining entries or managing trailing stops.

Details

The indicator logic is hierarchical, meaning mid-term points are derived from short-term points, and long-term points are derived from mid-term points. This ensures that every higher-level signal is confirmed by underlying price action structures. The "Ignore Inside Bars" feature is particularly useful during high volatility or when trading assets like cryptocurrencies to filter out market noise that doesn't represent a true structural reversal.

Settings

General Settings

• Resolution: Changes the timeframe from which the calculations are derived.
• Ignore Inside Bars?: When enabled, the script will skip bars that are contained within the range of the previous bar.
• Allow Repainting?: Determines if the security calls allow for repainting behavior.

Short Term Settings

• Show Short Term Highs/Lows?: Toggles the visibility of short-term pivot labels.
• Short Term Highs/Lows Color: Customizes the color of the short-term triangular labels.

Mid Term Settings

• Show Mid Term Highs/Lows?: Toggles the visibility of mid-term pivot labels.
• Mid Term Highs/Lows Color: Customizes the color of the mid-term triangular labels.

Long Term Settings

• Show Long Term Highs/Lows?: Toggles the visibility of long-term pivot labels.
• Long Term Highs/Lows Color: Customizes the color of the long-term triangular labels.

FAQ

How do I use the Reversal Points?

You can use the different tiers to identify trend strength; long-term points suggest significant reversals while short-term points help with timing within a trend.

When should I ignore inside bars?

It is recommended to ignore inside bars during periods of high volatility or when trading crypto markets to avoid false signals.

How can I access Reversal Points?

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