[NM] Reversal Candles v01

The [NM] Reversal Candles v01 indicator identifies potential trend reversals by detecting specific price action patterns where current candles exceed previous ranges while closing in a dominant position.

Usage

The indicator can be used to spot turning points in the market based on bullish and bearish reversal candle criteria.

Bullish (BUY) Reversal Criteria:

• The low of the current candle is lower than the low of the previous candle.
• The low is the lowest of the last 7 candles.
• The high of the current candle exceeds the high of the previous candle.
• The close is within the upper 50% of the candle's total range.

Bearish (SELL) Reversal Criteria:

• The high of the current candle is higher than the high of the previous candle.
• The high is the highest of the last 7 candles.
• The low of the current candle is lower than the low of the previous candle.
• The close is within the lower 50% of the candle's total range.

Example Trade Execution:

1. Upon a Buy signal, traders may place a buy stop order slightly above the high of the signal candle.
2. A stop loss can be placed slightly below the low of the signal candle.
3. Targets can be set at a 1:1 risk-to-reward ratio, or traders can take partial profits at 1:1 and trail the remaining position.

Details

The script focuses on identifying "outside bars" that also represent a local peak or trough within a 7-period lookback. By requiring the price to close in the upper or lower half of its range, the script ensures that the reversal candle shows strong momentum in the new direction before a signal is plotted. This logic is particularly effective on higher timeframes where price action tends to be more reliable.

Settings

• This script currently uses hard-coded logic for the 7-period lookback and range calculations to ensure consistency with the original methodology. No user-adjustable inputs are required for the core signal calculation.

FAQ

How do I access [NM] Reversal Candles v01?

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

Which timeframes are best for this indicator?

While the script functions on all timeframes, it generally provides more reliable signals on higher timeframes (such as 4H or Daily) where market noise is reduced.

Can I use this with other indicators?

Yes, it is recommended to use these reversal signals in conjunction with other technical analysis tools such as Support/Resistance levels, EMAs, or Fibonacci retracements to confirm the validity of the reversal.