Consecutive Candle Count Momentum Strategy

The Consecutive Candle Count Momentum Strategy indicator identifies potential trend continuation opportunities by tracking sequences of identical candle closes and calculating their historical success rates. This tool provides a quantitative approach to momentum trading by visualizing when a specific number of consecutive bullish or bearish candles is reached and evaluating how often price continues in that direction within a defined look-back period.

Usage

The tool is primarily used to identify momentum breakouts based on price persistence.

• Bullish Signal: Triggered when the price closes higher than the previous close for a user-defined number of consecutive bars (default is 3).
• Bearish Signal: Triggered when the price closes lower than the previous close for a user-defined number of consecutive bars (default is 3).

The indicator displays these signals as columns on a separate pane. Additionally, it tracks the success of these signals by checking if the price moves favorably within a "Test Period." A "Win Rate" line for both buy and sell signals is plotted, allowing traders to see which momentum conditions have historically performed better on the current timeframe and asset.

Details

The script executes a simple count logic where ups increments if the current close is higher than the previous close and resets to zero otherwise; a similar logic applies to dns for bearish closes.

To determine the effectiveness of a signal, the script looks ahead (using historical data) to see if the highest close (for buys) or lowest close (for sells) within the specified Max Bars Before Exit meets the Min Win % threshold. This success is then back-plotted on the chart with an offset to align with the original signal, providing a visual representation of "Worked" vs. "Triggered" signals.

Settings

• Consecutive Up Bars: The number of higher closes required to trigger a bullish momentum signal.
• Consecutive Down Bars: The number of lower closes required to trigger a bearish momentum signal.
• Max Bars Before Exit: The look-back/look-ahead period used to determine if a signal was successful (e.g., did price go higher within 5 bars?).
• Min Win %: The minimum percentage move required during the test period to classify a signal as "successful."

FAQ

How do I interpret the Win Rate lines?

The Win Rate lines represent the cumulative percentage of signals that met the success criteria over the entire visible history of the security. A higher line indicates that the momentum pattern has a better historical track record of continuing further.

Can I use this for automated alerts?

Yes, the script includes optimized alerts for both Buy and Sell signals that trigger once per bar close when the consecutive candle threshold is first met.

How can I access the Consecutive Candle Count Momentum Strategy?

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