Phase Exhaustion Reversal

The Phase Exhaustion Reversal indicator is an intraday reversal tool that identifies the exhaustion of short-horizon momentum bursts against broader structural gradients using directional efficiency. By measuring the "Phase Gap" between two efficiency horizons, the script isolates moments where price has overextended and is likely to realign with the prevailing market trend.

Usage

The Usage section describes how the script can be used to navigate intraday price action. The indicator is primarily designed for 1-minute to 15-minute timeframes on liquid instruments like BTCUSDT, ETHUSDT, NQ, or ES.

• Realignment Signals: The script identifies "Realign Up" (bullish) and "Realign Down" (bearish) setups. A bullish signal occurs when a sharp bearish burst exhausts itself while the medium-term structural gradient remains bullish.
• Execution Model: Signals arm at the close of a confirmed bar. The script visualizes an entry at the open of the following bar to ensure the data is actionable and non-repainting.
• Risk Management: Upon a signal, the tool automatically draws four "rails": Entry, Invalidation (Stop Loss), Target 1, and Target 2. The Invalidation level is determined by structural swing points combined with an ATR buffer to account for volatility.
• Market Context: Users should use the background "Regime Ribbon" and the dashboard to filter signals. For instance, signals in "Extended" regimes might behave differently than those in "Compressed" or "Transitioning" environments.

Details

The script is built on the mathematical primitive of Directional Efficiency (Transport divided by Agitation). Transport measures the net displacement over a window, while Agitation measures the total path length covered.

• Phase Gap: This is the core engine of the script. It calculates the difference between short-horizon efficiency (reactive) and medium-horizon efficiency (structural). This gap is normalized by its rolling maximum to ensure thresholds remain consistent across different volatility regimes.
• Exhaustion-and-Recede State Machine: Unlike standard oscillators that fire purely on extremes, this script requires the Phase Gap to reach a qualified peak and then recede by a specific fraction. This confirms that the momentum has actually begun to fade before a signal is triggered.
• Regime-Conditional Scaling: The script adjusts its sensitivity based on the detected market regime (Extended, Compressed, Transitioning, or Neutral) and the specific timeframe being traded, allowing for adaptive thresholding.

Settings

Core Settings

• Auto-Scale Horizons: Automatically recalibrates the short and medium windows based on the timeframe to maintain consistent physical time analysis (approx. 35 min and 2 hours).
• Short Horizon: The number of bars used for reactive efficiency measurement (used if Auto-Scale is off).
• Medium Horizon: The number of bars used for structural gradient measurement (used if Auto-Scale is off).
• Phase Gap Threshold: The level the normalized gap must reach to qualify as exhaustion.
• Cooldown Bars: The minimum number of bars required between consecutive signals to prevent clustering.

Risk Settings

• ATR Length: The lookback period for the Average True Range used in stop loss calculations.
• ATR Floor Multiplier: The minimum distance for an Invalidation level, expressed as a multiple of ATR.
• TP1/TP2 R-Multiple: Profit targets defined as a multiple of the initial risk (the distance between Entry and Invalidation).

Visuals

• Show Regime Ribbon: Toggles the background colors representing market regimes.
• Show Active Tint: Highlights bars in green (long) or red (short) when a trade observation is active.
• Show Dashboard: Toggles the real-time status display in the top-right corner.

FAQ

How do the different regimes affect the signals? The script adapts its sensitivity based on the regime. For example, in a "Compressed" (ranging) regime, the Phase Gap threshold is lowered to catch smaller dislocations, while in an "Extended" (trending) regime, it requires more significant exhaustion to trigger.

What does it mean when a signal is "Armed" vs "Triggered"? "Armed" means the exhaustion-and-recede logic has been satisfied on the current bar close. "Triggered" means the entry price has been reached on the following bar, and the trade observation is now active with tracked targets and invalidation levels.

How can I access the Phase Exhaustion Reversal indicator? You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.