Breakout Reversal Entry on WMA - NG1! Overnight ver 1

The Breakout Reversal Entry on WMA - NG1! Overnight ver 1 tool is a mean-reversion strategy designed to identify and trade price exhaustion points when the market deviates significantly from a Weighted Moving Average (WMA). It aims to capture reversals by entering positions once the price stretches beyond a user-defined threshold from the average, particularly optimized for overnight trading sessions.

Usage

The strategy identifies potential reversal zones by measuring the distance between the current price (High or Low) and the WMA. When the price exceeds the specified "Drop" or "Climb" distance in ticks, the script interprets this as an overextended move and plots an arrow to signal a reversal entry.

• Long Entries: Triggered when the price drops a specific number of ticks below the WMA.
• Short Entries: Triggered when the price climbs a specific number of ticks above the WMA.
• Time Filtering: Users can restrict entries to specific hours (e.g., the overnight session) to avoid volatile opens or illiquid periods.
• Exits: The strategy utilizes bracket orders. Users can choose between a fixed market stop or a trailing stop to lock in profits or mitigate losses based on tick values.

Details

The script uses a Weighted Moving Average (WMA) as its core baseline because WMAs are more sensitive to recent price action than Simple Moving Averages. The reversal logic is based on the concept of "rubber band" price action: when price moves too far from its mean, it has a statistical tendency to revert toward it.

The strategy is specifically configured to handle tick-based movements, making it highly applicable to futures markets like Natural Gas (NG1!). By allowing different thresholds for "Drop" and "Climb," traders can account for directional bias or differing volatility levels in bullish versus bearish moves.

Settings

Strategy Configuration

• Length: Sets the lookback period for the Weighted Moving Average.
• Source: Determines the price data used to calculate the WMA (e.g., Close, HL2, etc.).
• When price drops (In Ticks) Enter Long: The distance below the WMA required to trigger a long reversal.
• When price climbs (In Ticks) Enter Short: The distance above the WMA required to trigger a short reversal.

Risk Management

• Trailing Stop / Market Stop: A toggle to choose between a dynamic trailing stop or a static hard stop.
• Stop (in ticks): The distance from the entry price for the stop loss or trailing offset.
• Limit Out: The target profit distance in ticks from the entry price.

Session Settings

• Limit Time of Day (Buying Side): Enables or disables the time filter for new entries.
• Start/Stop trades (Est time): Defines the active session window for the strategy to execute new trades.

FAQ

How do I use this strategy for long-only trades?

To restrict the strategy to long positions, you can set the "When price climbs" input to an extremely high value (e.g., 10,000). This ensures the short entry threshold is never met.

Can I use this on timeframes other than the 1-minute chart?

Yes, while originally tested on a 1-minute timeframe for NG1!, the strategy can be applied to any timeframe. You will need to adjust the WMA length and tick thresholds to match the volatility of the chosen timeframe.

How do I get access to the Breakout Reversal Entry on WMA - NG1! Overnight ver 1?

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