Swing Failure Zones and Signals

The Swing Failure Zones and Signals indicator identifies potential market reversals by detecting swing failure patterns and highlighting them with dynamic zones and actionable signals. It aims to help traders spot key entry and exit points by pinpointing where price action fails to sustain momentum beyond previous highs or lows.

Usage

The indicator can be used to identify trend exhaustion and potential reversal zones. When a swing failure occurs at a significant price level, the tool plots a directional arrow and creates a colored zone.

• Bullish Signal (▲): Occurs when the price makes a new low relative to the lookback period but fails to close below the previous candle's low, instead closing above the previous high. This suggests a potential upward reversal.
• Bearish Signal (▼): Occurs when the price makes a new high relative to the lookback period but fails to close above the previous candle's high, instead closing below the previous low. This suggests a potential downward reversal.
• Zone Mitigation: Zones represent areas of interest. A zone is considered "mitigated" when the price returns to test that specific area. Users can choose to keep these on the chart or remove them automatically once touched.

Details

The script identifies swing failure points by comparing current highs and lows with extreme values established over a user-defined lookback period.

A Bullish Swing Failure is confirmed if the current low is the lowest in the lookback period, yet the price recovers to close above the previous candle's high. Conversely, a Bearish Swing Failure is confirmed if the current high is the highest in the lookback period, but the price drops to close below the previous candle's low. This logic filters for "trapped" liquidity where participants might have been stopped out before a reversal. The tool manages up to 500 active zones using box arrays to ensure chart performance remains optimized.

Settings

• Remove Mitigated Zones From Chart: When enabled, zones disappear as soon as the price enters them. When disabled, zones remain on the chart even after being tested.
• Range High/Low Lookback Period: Defines the number of previous bars used to determine the significant high and low levels for detecting failures.
• Bullish Color: Customizes the color for bullish arrows and zones.
• Bearish Color: Customizes the color for bearish arrows and zones.

FAQ

How do I access Swing Failure Zones and Signals?

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

What is a "mitigated" zone?

A zone is mitigated when the price action returns to the price level where the swing failure originally occurred, essentially "filling" the liquidity gap or testing the support/resistance.

Can I set alerts for these signals?

Yes, the indicator includes built-in alert conditions for both bullish and bearish signals, as well as alerts for when specific zones are mitigated.