Nico.Muselle

[NM] Reversal Candles v01

Reversal candles are a very easy way to identify a turn in trend, this indicator has some specific additional conditions for the reversal candle.

BUY Signal reversal candle
  • Low of current candle exceeds low of previous candle
  • Low of current candle is lowest for last 7 candles
  • High of current candle exceeds high of previous candle
  • Close of current candle is in the upper 50% of the range of this candle

SELL Signal reversal candle
  • High of current candle exceeds high of previous candle
  • High of current candle is Highest for last 7 candles
  • Low of current candle exceeds low of previous candle
  • Close of current candle is in the lower 50% of the range of this candle

How do I trade it ? (example buy signal)
  • Wait for close of the candle and the BUY signal
  • Put a buy stop entry 5 pips above the high of the candle
  • Put a stop loss 5 pips below the low of the candle
  • Calculate difference between entry and stop loss and set your target that number of pips above the entry for a 1:1 RR trade*
  • Wait for your your target or stop loss to be triggered
    * Alternatively, you can take 50% of the profit at the 1st (1:1 RR) profit target, move your stop to break even and let the rest of the position run for a higher potential profit.

Further advice on use
Personally I always look for some additional confirmation like a support or resistance level , a bounce of the EMA or a fibonacci level, but please feel free to add additional filters to make the strategy even more effective. I would strongly advise to backtest your strategy first so you can fine tune it and have confidence in trading it. Forward testing on a demo account before going live, although it takes longer, can be a worthy alternative. Works better on higher time frames.

How do you use it ?
Please leave a note in the comment section below to let me know if you use the indicator and how. There's definitely not just one way to use the indicator so I'm curious about your feedback.

To apply the script to your chart, just add it to your favourites so you can easily find it in the Indicators list.

Kindly leave me a thumbs up if you like this indicator or support my work, and do not hesitate to visit my other indicators. Thanks for your visit
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//  Created by Nico Muselle
study(title="[NM] Reversal Candles", shorttitle="Reversal by NM", overlay=true)


// 
ReversalLong = low[0] < low[1] and high[0] > high[1] and close[0] > low[0] + (high[0] - low[0])/2 and low[0] < low[2] and low[0] < low[3] and low[0] < low[4] and low[0] < low[5] and low[0] < low[6] and low[0] < low[7]
ReversalShort = low[0] < low[1] and high[0] > high[1] and close[0] < high[0] - (high[0] - low[0])/2 and high[0] > high[2] and high[0] > high[3] and high[0] > high[4] and high[0] > high[5] and high[0] > high[6] and high[0] > high[7]


// Bar Colors and signals
plotshape(ReversalLong,  title= "ReversalLong", location=location.belowbar, color=green, style=shape.triangleup, text="BUY")
plotshape(ReversalShort,  title= "ReversalShort", location=location.abovebar, color=red, style=shape.triangledown, text="SELL")

//bgcolor(ReversalLong ==1 ? lime : ReversalShort==1 ? red : na, transp=70)
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+2 Reply
Looks cool, what timeframe will this be suitable for?
+2 Reply
@leeweechong, Candle patterns work best on the higher time frames ... daily, weekly, montly ...
I'm not saying it cannot work on lower time frames, but success rate will be lower in my opinion. But hey, why don't you check it out for yourself ? ;)
Reply
leeweechong PRO Nico.Muselle
@Nico.Muselle, I WILL! Thanks for the effort. Appreciate it. :)
Reply
i haven't backtested this yet but this looks seriously good if you combine it with
swing high low support @ resistance by patterson together with nm's rsi indicators
if this works as what is described, when the reversal signal appears at a support or resistance,
its about time to make a sell / buy move and TP at next resistance if entry is a sell and
TP at the next support if entry is a buy.

if RSI is very strong, avoid TP because there might a support / resistance break.
if these 3 works, these 3 indicators will be the best ones to follow
+2 Reply
@locke_yong, thank you for your comments and description of how you would use it. It totally makes sense ! As said in my description, combine this with Support & Resistance or a bounce off the EMA in a trend, backtest it and see how it does. When you have a positive expectancy, you are good to go ;)
Reply
Hello
Very nice indicator.
Is there a way to set an alert in tradingview when the indicator draws a reversal sign?
Thanks
Reply
@jaxx, yes, i believe so, check this out: https://blog.tradingview.com/en/alerts-in-pine-1633/
Reply
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