Candlestick Reversal and Trend Signals

The Candlestick Reversal and Trend Signals indicator provides a comprehensive framework for detecting pivotal candlestick patterns while validating them through multi-timeframe analysis and trend filters. It simplifies technical analysis by visually marking high-probability reversal formations alongside dynamic trend and swing levels.

Usage

The Usage section describes how the script can be used to identify market entries and potential trend shifts. Traders can monitor the chart for specific symbols representing various patterns. For example, a "▲" symbol appearing below the price action suggests a bullish reversal, whereas a "▼" symbol above indicates a bearish reversal.

The indicator includes a Timeframe Multiplier, allowing users to perform analysis on higher timeframes relative to the current chart. Setting the multiplier to 2 on a 15-minute chart will perform the candlestick detection based on 30-minute bar data. Additionally, the integrated 3 EMA system and swing level identification act as points of confluence; users should look for candlestick patterns occurring at or near these support/resistance zones for increased signal reliability.

Details

The script operates by calculating specific candlestick attributes such as body length, wick ratios, and direction compared to historical data. It supports a variety of patterns:

• Engulfings: Compares the current body length to the previous candle.
• Dojis: Uses the Wick Ratio and Body Size thresholds to identify Dragonfly or Gravestone formations.
• Haramis: Detects candles contained within the range of the previous bar.
• Piercing Lines & Dark Cloud Covers: Analyzes midpoints of previous candle bodies to identify partial reversals.
• Morning & Evening Stars: Three-candle formations indicating trend exhaustion.

To reduce noise, the indicator includes a filterCondition function. This validates signals based on user-defined criteria like "3 EMA Trend" (ensuring signals align with the medium-term momentum) or "Relative Volume/Size" (ensuring the signal candle shows significant market participation).

Settings

Main Settings

• Filter Period: The lookback period used for calculating average candle size or volume for filtering.
• Filter Signal Threshold: The multiplier used to determine if a candle's volume or size is significant enough to generate a signal.
• 3EMA Periods: Customizable periods for the three exponential moving averages used for trend detection.
• Wick Ratio Thresholds: Sensitivity controls for identifying Doji patterns based on wick-to-body proportions.
• TimeFrame Multiplier: Multiplies the current chart interval to perform higher timeframe analysis.
• Filter Type: Selects the logic for signal validation (e.g., 3 EMA Trend, Relative Volume, or both).
• Swing Levels: Toggles the visibility of significant pivot highs and lows.
• 3 EMA: Toggles the display of the moving average cloud.

Patterns

• Bull/Bear Engulfings: Enable detection of engulfing patterns.
• Bull/Bear Dojis: Enable detection of Dragonfly and Gravestone Dojis.
• Bull/Bear Haramis: Enable detection of harami patterns.
• Piercing Line and Dark Cloud Cover: Enable detection of these two-candle reversal patterns.
• Morning/Evening Stars: Enable detection of three-candle reversal patterns.

FAQ

How do I use the TimeFrame Multiplier?

The multiplier scales the calculation logic. If you are on a 1-hour chart and set the multiplier to 4, the patterns will be detected based on 4-hour candle closes. To use the current chart's timeframe, set this value to 1.

What do the different symbols mean?

Symbols are labeled on the chart for clarity. Generally, "▲" represents bullish patterns and "▼" represents bearish patterns. You can hover over the labels to see the specific pattern name, such as "Morning Star" or "Engulfing".

How can I access the Candlestick Reversal and Trend Signals indicator?

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