Peak Reversal v2

The Peak Reversal v2 indicator helps traders identify potential price reversal areas and trending market conditions by utilizing a multi-layered Keltner Channel framework.

Usage

The indicator displays three sets of ATR-based bands (Tight, Normal, and Extreme) around an Exponential Moving Average (the mean). Traders can use these levels to gauge market exhaustion or strength.

• Band Crosses: Indicated by triangles, these markers highlight when price penetrates a chosen band level. This helps identify aggressive (Tight) or conservative (Extreme) entry points for mean reversion.
• Free Bars: Represented by star icons, a "Free Bar" occurs when a candle's entire price range (low for bullish, high for bearish) sits completely outside the bands. These signify extreme deviations from the mean.
• Mean Deviations: The script automatically colors candles based on how long price remains outside the bands. Darker shades indicate prolonged deviations, suggesting an increasing probability of a "snapback" or return to the mean.
• Advanced Mode: This toggle flips the color logic and shape orientation. While standard mode follows "buy low, sell high," advanced mode is tailored for momentum traders looking to "buy high and sell higher."

Details

The script is heavily inspired by the technical analysis principles found in Adam Grimes' "The Art and Science of Trading." It implements Keltner Channels to measure volatility-adjusted distance from the average price. Unlike standard Bollinger Bands, these channels use ATR, providing a more consistent structure during different volatility regimes. The implementation tracks the duration of band breaches to provide visual feedback on trend intensity through color gradients.

Settings

Keltner Channel Configuration

• Keltner Channel EMA Length: Sets the period for the central moving average (the mean).
• Keltner Bands Tight Multiplier: Defines the distance for the innermost bands (default 1.125).
• Keltner Bands Normal Multiplier: Defines the distance for the middle bands (default 2.25).
• Keltner Extreme Multiplier: Defines the distance for the outermost bands (default 3.375).

Visibility

• Show Mean EMA?: Toggles the visibility of the central EMA line.
• Show Tight/Normal/Extreme Band?: Individual toggles for each set of volatility bands.

Signals and Modes

• Show Mean Deviations?: Enables candle coloring based on the duration of band breaches.
• Show Band Crosses?: Toggles triangle markers for price/band intersections.
• Show Free Bars?: Toggles star markers for candles completely outside the bands.
• Advanced Mode: Reverses the color and shape logic for trend-following perspectives.
• Bands to Use For Crosses and Free Bars: Selects which band level (Tight, Normal, or Extreme) triggers the visual signals.

FAQ

How do I use the different band multipliers?

The multipliers allow you to scale the sensitivity of the indicator. The Tight band is useful for scalping or aggressive entries, while the Extreme band identifies major market overextensions.

What is a "Free Bar"?

A Free Bar is a candle that has completely cleared the selected band level (e.g., in a bullish move, the low of the candle is above the upper band), signifying significant momentum.

How can I access Peak Reversal v2?

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