Estimating Breakout Frequencies by Previous Candle Direction
Summary
This indicator estimates how often price has crossed levels above the prior candle’s high or below its low, separated according to whether that prior candle was bullish or bearish. It displays the historical percentages at several successive levels on the current chart, giving traders a conditional view of how far price has previously moved in either direction.
Users can set level spacing in fixed price units or as a percentage of price, and can restrict the historical sample with a start date. The document illustrates the display with example percentages and describes possible use in assessing breakout likelihood or stop placement. These are historical frequencies, not forecasts: no out-of-sample validation, transaction costs, sample-size guidance, or evidence of profitable trading is provided. Results may depend on the instrument, timeframe, and selected history.
Key ideas
- The indicator counts historical moves beyond levels set from the previous candle’s high and low.
- It separates the counts by whether the previous candle closed above or below its open.
- Level spacing can use fixed price increments or a percentage of price.
- A start date can limit the historical sample.
- Historical crossing frequencies do not establish future probabilities or trading profitability.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.