CM_Price-Action-Bars-Price Patterns That Work!

The CM_Price-Action-Bars indicator identifies and highlights four high-probability price action candle patterns to help traders spot potential reversals and breakout opportunities.

Usage

The Usage section describes how the script can be used to identify market sentiment through specific candlestick formations. Traders can use these patterns to confirm entries or exits based on technical price action.

Pattern Interpretations

• Pin Bars (Green/Red): These represent rejection patterns. A bullish Pin Bar occurs at a local low with a long lower wick, while a bearish Pin Bar occurs at a local high with a long upper wick.
• Shaved Bars (Aqua/Fuchsia): These are candles that close very near their absolute high or low, indicating strong momentum and minimal price rejection at the close.
• Inside Bars (Yellow/Blue): These occur when the current candle is completely contained within the range of the previous candle, signaling consolidation and a potential upcoming breakout.
• Outside Bars (Orange/White): These occur when the current candle's high and low exceed the previous candle's range, indicating a surge in volatility and a "stop-run" or engulfing sentiment.

Details

The indicator is constructed using specific percentage-based thresholds and lookback periods to ensure the patterns are contextually relevant.

• Pin Bar Logic: The script calculates the wick size relative to the total candle range. It also uses a lookback period to confirm if the Pin Bar is occurring at a relative high or low, which increases the significance of the reversal signal.
• Shaved Bar Logic: This identifies "Marubozu-style" candles where the closing price is within a small percentage of the candle's extreme (high or low).
• Trend Context: By utilizing the "PBars Look Back Period," the tool filters for signals that appear at exhaustion points of recent price swings rather than in the middle of a range.

Settings

• Percentage Input For PBars: Determines the minimum percentage of the candle that must consist of a wick for it to be classified as a Pin Bar.
• PBars Look Back Period: Sets the number of previous bars used to define the current trend's highest highs and lowest lows.
• Percentage Input For Shaved Bars: Defines the maximum allowable distance (as a percentage of the total range) between the close and the high/low for a Shaved Bar.
• Show Pin Bars?: Toggles the visibility of Pin Bar highlighting.
• Show Shaved Bars?: Toggles the visibility of Shaved Bar highlighting.
• Show Inside Bars?: Toggles the visibility of Inside Bar highlighting.
• Show Outside Bars?: Toggles the visibility of Outside Bar highlighting.
• Check Box To Turn Bars Gray?: Optional setting to turn all non-pattern bars gray to make the identified signals stand out more clearly.

FAQ

How do I adjust the sensitivity of the reversal signals? You can adjust the "Percentage Input For PBars" to require longer wicks or modify the "Look Back Period" to change how the script defines local highs and lows.

Can I use this indicator for breakout trading? Yes, the Inside Bar and Outside Bar patterns are specifically designed to identify periods of consolidation and volatility expansion, which are often used in breakout strategies.

How do I access the CM_Price-Action-Bars indicator? You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.