Wick Reversal Spotter

The Wick Reversal Spotter indicator identifies potential price reversals by analyzing the relationship between candle wicks and bodies relative to their historical averages. It aims to highlight exhausted price movements where wicks significantly exceed standard sizes, providing early signals for trend shifts or pullbacks.

Usage

The Usage section focuses on identifying bars with disproportionately long wicks compared to a moving average filter. Traders can use the histogram to visualize wick intensity:

• Single Bar Reversal: When the "Two bar reversal" setting is disabled, the script highlights individual bars where the upper or lower wick exceeds the dynamic filter line. This indicates immediate price rejection.
• Two Bar Reversal: When enabled, the script looks for a "continuation" bar following a long-wick bar. It highlights the second bar if it closes in the opposite direction of the preceding wick, confirming the reversal sentiment.
• Color Coding: Red highlights typically indicate bearish pressure (large top wicks), while green highlights indicate bullish pressure (large bottom wicks).

Details

The script calculates the "wick measure" by subtracting the body of the candle from the total range (High - Low) for both bullish and bearish contexts. To determine if a wick is significant, it calculates a Simple Moving Average (SMA) of these wick measurements over a user-defined length. This SMA is then multiplied by an "Amplitude" factor to create a dynamic threshold. Only wicks that cross this threshold are considered "outliers" or significant reversal signals.

Settings

• Amplitude: Multiplier applied to the average wick size. Increasing this value makes the filter stricter, showing fewer but more significant signals.
• Length: The lookback period used to calculate the average wick size.
• Bear/Bull Close Filter: When enabled, long top wicks are only signaled if the bar has a bearish close, and long bottom wicks only if the bar has a bullish close.
• Two bar reversal: Switches the logic to require a confirmation bar following the wick outlier.

FAQ

How do I interpret the histogram?

The histogram displays the size of the wicks. Bars that cross the gray SMA lines are considered significant. The upper histogram tracks top wicks (bearish reversal potential), while the lower histogram tracks bottom wicks (bullish reversal potential).

Can I change the sensitivity of the signals?

Yes, by adjusting the "Amplitude" setting. A higher amplitude requires wicks to be much larger than the recent average to trigger a highlight.

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.