Trend + Reversal Probability

The Trend + Reversal Probability indicator provides a comprehensive dashboard for identifying trend direction, strength, and the likelihood of a price reversal based on multiple technical factors. By combining momentum, exhaustion, and trend-following metrics, the tool offers a clear, plain-language assessment of market conditions to help traders identify when a move may be losing steam.

Usage

The indicator displays a table on the chart that provides several key readings:

• Current Trend: Identifies whether the market is Bullish, Bearish, or Neutral based on EMA relationships, MACD, and RSI filters.
• Trend Strength: A percentage value indicating how strong the current trend is. Higher values suggest a robust trend, while lower values suggest fading momentum.
• Reversal Probability: A calculated score (0-100%) that estimates the risk of the current trend ending.
  • Low Reversal Risk: Trend remains strong with no clear exhaustion signs.
  • Moderate Reversal Risk: Some signs of momentum fading or overextension are appearing.
  • High Reversal Risk: Multiple exhaustion signals (e.g., RSI extreme + Bollinger Band stretch) suggest a potential turn.
• Main Driver: Highlights the primary technical factor contributing to the current reading, such as "Overbought pressure" or "MACD crossover."

Details

The script uses a weighted scoring system to evaluate market conditions:

• Trend Calculation: Combines the relationship between a fast and slow EMA, price position relative to moving averages, MACD signal line status, and RSI levels.
• Reversal Probability Calculation: Aggregates points from various "exhaustion" triggers:
  • RSI & Stochastic Extremes: Identifies overbought or oversold conditions.
  • Bollinger Band Stretch: Measures if price has moved significantly beyond standard deviations.
  • EMA Deviation: Uses ATR to calculate if the price is overextended from the fast EMA.
  • Momentum Loss: Detects MACD histogram shifts and crossovers.
  • Volume Climax: Factors in unusual volume spikes as potential signs of trend exhaustion.

Settings

General Settings

• Table Position: Determines where the dashboard table is displayed on the chart.
• Text Size: Adjusts the font size within the table.

Indicator Settings

• RSI Length: The lookback period for the Relative Strength Index.
• Stochastic Length: The lookback period for the Stochastic Oscillator.
• Fast EMA / Slow EMA: Lengths for the two exponential moving averages used for trend detection.
• Bollinger Length / Mult: Period and standard deviation multiplier for the Bollinger Bands.
• ATR Length: Period used to calculate the Average True Range for price extension analysis.
• Volume MA Length: Period for the moving average of volume to detect volume spikes.

FAQ

How do I interpret a high reversal probability during a strong trend?

A high reversal probability indicates that while the trend is active, price has reached extreme levels or momentum is slowing, suggesting that a correction or reversal is increasingly likely.

Can I set alerts for trend changes?

Yes, the script includes built-in alerts that trigger when the trend flips (e.g., Bullish to Bearish) or when the Reversal Probability reaches the High threshold (70%).

How can I access Trend + Reversal Probability?

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