The Next Pivot

The Next Pivot indicator uses various similarity measures to compare historical price sequences to current market behavior to forecast future movements. By identifying the most statistically similar historical pattern, the tool projects a potential price path and ZigZag structure forward, providing traders with a data-driven look at possible upcoming price action based on historical precedent.

Usage

The Usage section focuses on how the script identifies historical correlations and translates them into actionable forecasts. The script searches through the user-defined historical lookback period to find a sequence that matches the most recent bars. Once a match is found based on the selected similarity method, the price action that immediately followed that historical sequence is projected onto the current chart.

Forecasting Features

• Price Path Projection: Draws a dotted line representing the projected price trajectory based on the historical match.
• ZigZag Projection: Projects potential future pivot points (highs and lows) to visualize structural market shifts.
• Linear Regression Channel: Optionally plots a forecasted channel to identify potential mean reversion zones or trend boundaries within the projection.

Similarity Methods

The script allows users to choose how "similarity" is calculated, which significantly alters the forecast:

• Spearman/Pearson/Kendall: Correlation-based methods that look for similar trends and relationships.
• Cosine Similarity: Measures the orientation of price vectors.
• Euclidean/Mean Squared Error: Focuses on the absolute distance or variance between price points.

Details

The script executes a comparison engine that evaluates the current "Correlation Length" against historical data within the "Bars Back To Search" range. It can search for similarities based on raw Price or % Change, which helps normalize data across different volatility regimes.

It is important to note that the projection is a direct reflection of a single historical "best match." While statistically significant in terms of similarity, these projections are based on historical outcomes and do not account for new fundamental catalysts. The script uses the ZigZagLib to identify historical structural points and replicate their frequency and magnitude in the forecast.

Settings

Similarity Method

• Correlation Length: The number of recent bars used to find a match in history (5 to 100).
• Forecast Length: The number of bars to project into the future (up to 250).
• Similarity Calculation: Selects the mathematical algorithm (e.g., Pearson, Cosine, MSE) used to rank historical sequences.
• Looks For Similarities In: Determines if the search is based on raw Price levels or the Percentage Change of bars.
• Bars Back To Search: The depth of historical data the script analyzes to find a match.

Aesthetics

• Show Projected Zig Zag: Toggles the visibility of projected pivot levels.
• Show Projected Price Path: Toggles the visibility of the dotted forecasted price line.
• Lin Reg σ: Adjusts the standard deviation for the forecasted linear regression channel.
• Projected Zig Zag Color: Sets the color for the pivot forecast.
• Forecast Color: Sets the color for the price path and channel.

FAQ

How does the indicator find the "most similar" sequence? The tool scans historical data up to the specified "Bars Back To Search" limit. It applies the selected similarity calculation (like Pearson Correlation or Cosine Similarity) to every window of price data and identifies the one with the highest mathematical score compared to the current sequence.

Can the forecast change as new bars appear? Yes, as new price data is added, the "current" sequence changes. This may result in a different historical match being identified as the most similar, which will update the projected price path and ZigZag pivots accordingly.

How do I get access to The Next Pivot? You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.