PivotPoints with Momentum confirmation

The PivotPoints with Momentum confirmation indicator filters standard pivot point reversals by requiring a corresponding shift in momentum, helping traders identify higher-probability turning points while reducing market noise.

Usage

The Usage section describes how the script can be used to identify potential market reversals. By combining price action (pivots) with momentum (SMI calculations), the script provides visual cues for potential entries.

• Bullish Signals: Indicated by a green triangle below the bar. These occur when a pivot low or a bullish pin bar aligns with a rising momentum value.
• Bearish Signals: Indicated by a red triangle above the bar. These occur when a pivot high or a bearish pin bar aligns with a falling momentum value.
• Filtering: Users can compare the colored signal triangles with the small black triangles (standard pivots). Typically, the momentum filter removes a significant portion of false signals, focusing only on those where momentum supports the price reversal.

Details

The script executes a non-delayed confirmation by looking at real-time momentum rather than waiting for subsequent candle closes. It utilizes a smoothed SMI (Stochastic Momentum Index) calculation to determine the momentum trend.

The logic includes:

1. Pivot Detection: Identifies standard 1-left, 1-right pivot highs and lows.
2. Momentum Analysis: Uses a nested EMA approach to smooth the relative difference between price and its range (SMI).
3. Pin-bar Logic: Includes specific price action checks where a signal can be triggered even before a full pivot is formed if a pin-bar occurs alongside a momentum shift.

Settings

• Percent K Length: The lookback period used for the calculation of the lowest lows and highest highs in the momentum formula.
• Percent D Length: The length of the smoothing EMAs applied to the momentum calculation to reduce noise.

FAQ

How do I use the signals for trading?

The indicator acts as a trigger rather than a complete strategy. It is best used in conjunction with market structure analysis, trend identification, and volume to confirm high-probability trade setups.

Why do some pivots not have a colored triangle?

A colored triangle only appears when the standard pivot point is confirmed by a simultaneous reversal in the momentum trend. If the momentum does not support the pivot, the signal is filtered out.

How can I access this tool?

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

Credit to UCSGEARS for the momentum calculation concept.