Price Action Trend

The Price Action Trend indicator measures trend strength by modeling price position within a smoothed price-action channel and applying the Relative Strength Index (RSI) to that normalized series. Unlike standard trend tools that calculate RSI based on closing prices, this script evaluates the normalized relationship between price, the channel midpoint, and range width to provide a sensitive measure of directional conviction.

Usage

The tool is designed to identify trend strength and exhaustion points across any market or timeframe. Users can monitor trend conviction through the dedicated pane or observe overbought/oversold markers on the main chart.

• Trend Pane: The trend line serves as a gauge of momentum. When the line moves significantly away from the neutral zone, the trend is considered to have high conviction.
• Overbought / Oversold Markers: These indicate when the rate of directional change is potentially unsustainable. An overbought signal in an uptrend suggests the trend is "overheating," while an oversold signal in an uptrend might indicate a "buy the dip" opportunity as countertrend pressure exhausts.
• Price Average: An optional OHLC4 average line can be displayed to visualize the interaction between price and the price-action channel.

Details

This script utilizes smoothed channels built from the RMA of Highs and Lows. By normalizing price against this channel and then running RSI on the resulting series, the indicator becomes sensitive to range shape and asymmetric wicks rather than just the center of the candle. This method typically allows the trend metric to decay and recover faster than traditional RSI applications. The overbought/oversold logic employs Williams fractal-style confirmation to identify dynamic exhaustion levels.

Settings

Settings

• Pane Plot Mode: Selects whether the indicator pane displays the Trend series or the Overbought/Oversold series.
• Trend Lookback Period: Adjusts the channel smoothing for the trend model. Higher values produce smoother results, while lower values react faster.
• Show Overbought & Oversold Shapes: Toggles the visibility of triangle markers on the main chart.
• Overbought/sold Lookback Period: Adjusts channel smoothing specifically for OB/OS detection.
• Overbought/sold Adaptive Length: Sets the smoothing for dynamic OB/OS levels based on recent pivots.

Display

• Transparency for the candle colour: Controls the opacity of bar colors when in Gradient mode.
• Trend Colour Mode: Choose between a "Classic" (Up/Down/Neutral) or "Gradient" (intensity based on strength) coloring system.

Price Average

• Show Price Average: Toggles the OHLC4 average price line.
• Lookback: Sets the calculation period for the price average.
• Smoothing: Selects the calculation method (SMA, EMA, or RMA).
• Colour Channel by Price Average: Colors the channel based on the price average's position relative to the channel bands.

Advanced

• Trend Upper/Lower Neutral Threshold: Defines the boundaries for the neutral trend zone.
• PA RSI Length: Choose between a fixed length (14) or matching the Trend Lookback Period.
• Show RSI (close): Displays a standard RSI of closing prices for comparison.

FAQ

How do I interpret the neutral zone? The neutral zone represents a lack of directional conviction. When the trend line resides between the upper and lower thresholds, the market is considered to be in a non-trending state.

Do the overbought/oversold markers repaint? The indicator does not alter closed bars. However, while a candle is forming, values update in real-time. OB/OS levels use confirmation logic that may result in levels updating as new bars provide confirmation for future calculations.

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