Wick Reversal

The Wick Reversal indicator identifies potential price reversals by detecting long wicks relative to the candle body size across one, two, or three-bar sequences. This tool helps traders spot areas of price rejection at local highs and lows, providing early signals for trend exhaustion or shifts in market sentiment.

Usage

The Usage of the Wick Reversal indicator is centered around identifying high-probability rejection zones. The script plots shapes on the chart labeled "One," "Two," or "Three" to signify the number of bars involved in the wick formation:

• One-Bar Reversal: A single candle with a long wick and a small body, often referred to as a pin bar or hammer/shooting star.
• Two-Bar Reversal: A formation where the combined price action of the current and previous candle creates a significant rejection wick relative to the total range.
• Three-Bar Reversal: A three-candle sequence where the net movement results in a long-tail rejection.

Traders typically look for Bullish Wick Reversals (upward triangles) at the bottom of a downtrend or at support levels, while Bearish Wick Reversals (downward triangles) are sought at the top of uptrends or resistance levels.

Details

The indicator calculates reversals based on the ratio between the price range and the real body size. For a signal to trigger, the wick must be at least 3.5 times larger than the real body. Additionally, the script checks if the current low (for bullish) or high (for bearish) is the lowest or highest point within the last five bars. This ensures the reversal signal occurs at a local extreme rather than in the middle of a consolidation phase.

Settings

As this script is primarily logic-driven based on hardcoded price action ratios, it focuses on the following visual outputs:

• Bullish Wick Reversal One/Two/Three: Toggles the visibility and color of the upward triangle shapes representing bullish rejections.
• Bearish Wick Reversal One/Two/Three: Toggles the visibility and color of the downward triangle shapes representing bearish rejections.

FAQ

How do I use the Wick Reversal indicator?

You can use it to identify exhaustion points in the market. Bullish signals appearing at support or bearish signals at resistance provide higher probability trade entries.

What do the "One," "Two," and "Three" labels mean?

These labels indicate how many candles the script used to calculate the rejection wick. A "Three" label means the price rejection was formed over a three-bar period.

Where can I access this tool?

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