Livermore's One Day Reversal

The Livermore's One Day Reversal indicator identifies high-probability price reversal patterns based on the classic trading principles of Jesse Livermore, specifically detecting shifts in momentum accompanied by volume confirmation.

Usage

The Usage section focuses on identifying potential exhaustion points in a trend. A bullish reversal is signaled when the price makes a new low compared to the previous bar but manages to close higher than the previous close on increased volume. Conversely, a bearish reversal is signaled when the price makes a new high but closes lower than the previous close on increased volume.

These signals are plotted as follows:

• Green Asterisk (*): Plotted below the bar to indicate a Bullish One Day Reversal.
• Red Asterisk (*): Plotted above the bar to indicate a Bearish One Day Reversal.

Traders can use these signals to anticipate trend changes or as exit signals for existing positions when volume confirms the price rejection.

Details

The script implementation follows the specific logic described in Richard Smitten's documentation of Livermore's methods. The core logic relies on three criteria:

1. Price Extreme: The current bar must exceed the previous bar's high (for bearish) or low (for bullish).
2. Price Reversal: The current close must be lower than the previous close (for bearish) or higher than the previous close (for bullish).
3. Volume Confirmation: The current volume must be higher than the previous bar's volume, indicating significant participation in the reversal move.

Settings

As a pure implementation of Livermore's price and volume logic, this script does not currently feature external inputs. It uses the following hardcoded logic:

• Bullish Condition: low < low[1] and close > close[1] and volume > volume[1].
• Bearish Condition: high > high[1] and close < close[1] and volume > volume[1].

FAQ

How do I use the Livermore's One Day Reversal signals?

The signals are best used in the context of an established trend to identify potential "climax" or "reversal" days where the trend may be exhausting.

What does the volume requirement signify?

The volume requirement ensures that the price reversal is backed by increased market activity, suggesting that the change in direction is more likely to be a significant turning point rather than a low-liquidity fluctuation.

How can I access Livermore's One Day Reversal?

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