Flexible Reversal Detector

The Flexible Reversal Detector indicator is an advanced analytical tool designed to identify local trend reversal zones based on customizable candlestick formation logic. It helps traders pinpoint potential turning points in the market by analyzing price structure, body size ratios, and preceding trend momentum.

Usage

The Flexible Reversal Detector can be used to spot "U-shaped" bullish reversals and "n-shaped" bearish reversals. A signal is generated when a specific sequence of candles occurs: an initial strong candle, followed by a series of smaller "middle" candles, and concluding with a strong reversal candle.

To use the tool effectively:

• Trend Identification: Look for bullish triangles appearing after a significant price drop or bearish triangles appearing after a price rise.
• Support/Resistance: The indicator plots colored boxes spanning the length of the pattern. These zones can be used to identify potential future support or resistance levels.
• Risk Management: When enabled, the script provides dynamic Take Profit (TP) and Stop Loss (SL) levels for the most recent signal, which can be calculated via ATR multipliers or fixed percentages.
• Volume Confirmation: Use the volume filter to ensure the final reversal candle has sufficient trading activity relative to its moving average.

Details

The script operates on a logic-based pattern detection system:

• Pattern Structure: It searches for an initial candle (the start of the move) and a final candle (the reversal). Between these, it validates that middle candles remain within a certain size threshold relative to the first candle.
• Trend Requirement: Before a "U" pattern is valid, the script checks if there was a preceding drop. Conversely, a "n" pattern requires a preceding rise. This ensures reversals are detected at the end of established local moves.
• Measurement Modes: Users can choose between "ATR" (Average True Range) and "Percentage" modes to define what constitutes a significant price move or body size.

Settings

Measurement Settings

• Measurement Mode: Choose between ATR-based or Percentage-based thresholds for detection logic.

ATR Settings

• ATR Length/Type: Configures the period and smoothing method (RMA, SMA, EMA, WMA) for ATR calculations.
• Global ATR Multiplier: Scales all ATR-based threshold requirements.

Pattern Settings

• Max Pattern Length: The maximum number of candles allowed to form a single reversal structure.
• Min Ratio / Mid Max Ratio: Defines the relative body size requirements for the final and middle candles compared to the first candle.
• Bars to Check: The lookback period used to determine if a sufficient price move preceded the pattern.

Volume Filter

• Use Volume Filter?: Enables a requirement that the final candle's volume must exceed a specified threshold.
• Volume Multiplier: The multiplier applied to the Volume SMA to set the minimum volume threshold.

Risk Management

• Show TP/SL Levels: Toggles the visibility of profit and loss targets for the latest signal.
• TP/SL Mode: Sets whether targets are calculated using a multiplier of the average range or a fixed percentage.

FAQ

How do I access Flexible Reversal Detector?

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

Why am I not seeing any signals on lower timeframes?

On markets with low volatility or lower timeframes, the default percentage/ATR thresholds might be too high. Try reducing the "Min Drop" or "Min Rise" settings to better fit the current price action.

What do the colored boxes represent?

The boxes represent the full span of the detected reversal pattern, from the high/low of the initial candle to the close of the final signal candle. These are helpful for identifying structure and potential zones of interest.