This script is used to visually highlight candles which may signal a reversal following a false break of a support or resistance level.
Inputs are:
Lookback period: look for the highest high and the lowest low of the prior x bars.
SMA length: used for a simple moving average of the range (high minus low) of the prior x bars.
Range multiple: used to filter out signals for any bars with a range smaller than the average range of the preceding bars (determined by SMA length above) e.g. a range multiple of 2 will only show signals for bars with a range twice of that of the average range of the preceding bars.
Range threshold: used to filter signals for bars both the open and close of the bar are at the extreme end of the bar e.g. a threshold setting of 33% will only show buy signals for bars which open and close within the upper 1/3rd of the bar’s high/low range (vice versa for sell signals). This helps highlight, for example, bars with a high which exceeds resistance in a current range but which close back inside the range.
Highlight signal bars?: This will highlight bars with a buy signal in green, sell signal bars in red, and all other bars in grey. The script was designed for use with a dark background, so you will need to play around with the bar colours in the style settings to suit your preferences.
Settings used in the example chart are not the default – they are lookback: 5, SMA length: 20, range multiple: 1.2, range threshold: 33%.
Enjoy!
Notas de prensa
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Added: - Labels of different colours to differentiate between signals (green labels for long signals with a bar close higher than the open, red for short signals with a bar close lower than the open, and yellow for all others). - Alert conditions to allow setting of alerts based on various signals.
Notas de prensa
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Updates:
Candle minimum range multiple default input setting changed to 1.5 bars (from 2.0).
Candle closing range threshold updated to 50% of candle range (from 33%).
Added an option to highlight the highest high and lowest low based on the lookback period setting.
Added a further condition to trigger an alert when either a long or short signal is triggered.
@ZinhoSte, Thanks so much, i came here exactly for this input
gbouch
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I have a slight issue - the indicator seems to a signal even if another condition is set. I have it set to trigger only when there is a long signal with an up candle, but it triggered when a short signal with a down candle was present. I have a picture to prove this - any way to address this?
NS91
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@gbouch, thanks for highlighting this. Could you send me the picture and I'll look into it?
NS91
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Correction/clarification of the original description:
The range threshold input is used to highlight bars where the close is at the opposite end to the false break, e.g. a threshold setting of 33% will only show buy signals for bars which close within the upper 1/3rd of the bar’s high/low range (and only sell signals within the lower 1/3rd of the range). The calculation does not take account of the signal bar's opening price.
One of the best reversal signals I've come across even on the default setting. Combined with a few other TAs, I get in the upper 80 percentile accuracy. What is the recommended settings if I am backtesting the daily chart but going back years?