Strong Daily Reversal Arrows / Labels

The Strong Daily Reversal Arrows / Labels indicator highlights potential trend reversals on daily charts by identifying specific candle interactions and body strength. This tool aims to help traders spot high-probability turning points by confirming when price action aggressively rejects the previous day's direction.

Usage

The indicator is primarily designed for daily timeframes. It detects two main setups:

• Bullish Reversal: Occurs when the previous day was bearish, the current day is bullish, the current close is above the previous day's close, and the candle body meets a minimum size threshold.
• Bearish Reversal: Occurs when the previous day was bullish, the current day is bearish, the current close is below the previous day's close, and the candle body meets a minimum size threshold.

Traders can use these signals as early warnings for trend changes or as confirmation for existing mean-reversion strategies. The visual output can be toggled between arrows, labels, or both to suit chart cleanliness preferences.

Details

The script focuses on "strong" reversals by calculating the ratio between the candle body and the total range (high to low). This ensures that signals are only generated when there is significant conviction in the price movement, rather than small dojis or indecisive candles.

The logic requires the current candle to "engulf" or close beyond the previous close, signifying a shift in market sentiment. A horizontal line is also plotted to visualize the previous day's closing price, serving as a dynamic reference level for the current session.

Settings

• Minimum Candle Body %: Filters signals based on the percentage of the candle body relative to its total range. Higher values ensure more decisive price action.
• Show Arrows: Toggles the visibility of triangle markers at the reversal points.
• Show Labels: Toggles the visibility of descriptive text labels ("Strong Bull Reversal" or "Strong Bear Reversal").
• Arrow Size: Adjusts the visual scale of the arrows from Tiny to Huge.

FAQ

How do I use the Strong Daily Reversal Arrows / Labels?

You can use the signals to identify potential entry points for swing trades or to manage exits on existing positions when a counter-trend reversal signal appears on the daily chart.

What does the "Minimum Candle Body %" setting do?

It filters out "weak" candles with long wicks. For example, a setting of 60% means the body of the candle must represent at least 60% of the total price movement from high to low for a signal to trigger.

How can I get access to this tool?

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