Price Action Signals

The Price Action Signals indicator identifies potential trend reversal or exhaustion points by analyzing the relationship between candle wick lengths, body size, and a moving average. It aims to highlight areas of buying or selling pressure where price action deviates from the current trend direction.

Usage

The Usage section describes how the script can be used to identify specific market conditions. Signals are generated based on the position of the price relative to a Moving Average (MA) and the specific characteristics of individual candles.

• Bullish Signals: These appear below candles when the price is currently below the specified Moving Average and a significant lower wick is detected, suggesting buying pressure in a downtrend.
• Bearish Signals: These appear above candles when the price is currently above the specified Moving Average and a significant upper wick is detected, suggesting selling pressure in an uptrend.

Users should calibrate the "Price Movement" and "Wick Percentage" settings based on the asset and timeframe being traded. For example, on high-volatility assets or higher timeframes, larger price movement thresholds are typically required to filter out market noise.

Details

The script executes calculations based on candle geometry. It measures the upperTail (High - Close) and lowerTail (Open - Low) to determine the dominant pressure.

The logic incorporates several conditions:

1. Price Movement: Checks if the absolute difference between the open and close is within a specific threshold.
2. Wick Ratio: Compares the difference between tails against the candle body size based on a user-defined percentage.
3. Trend Filter: Uses a Relative Moving Average (RMA) to determine the baseline trend. Bearish signals are only sought when price is above the MA, and bullish signals are only sought when price is below the MA.

Settings

• How much price moves during one candle: Defines the maximum absolute change between the open and close price for a signal to trigger.
• Length of candle wick must be x% the length of the candle body: Sets the minimum required ratio between the wick size and the candle body size.
• Length for moving average: Adjusts the lookback period for the baseline moving average used to filter signals.

FAQ

How do I access Price Action Signals?

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

What timeframes work best for this indicator?

The indicator is versatile but requires manual adjustment of the "Price Movement" setting for different timeframes (e.g., smaller values for 1m charts and larger values for Daily charts).

Can I change the trend filter length?

Yes, the moving average length is fully customizable in the settings menu, allowing you to align the filter with your preferred trend duration.