Estimating Candle Breakout Probabilities from Historical Highs and Lows

Summary

The indicator estimates how often price reaches successive levels above the previous high or below the previous low. It separates observations according to whether the prior candle was bullish or bearish, counts which levels were reached, and displays the resulting historical frequencies as percentages. Users can set the spacing between levels and how many to show; the script also provides alerts and a panel summarizing its directional calls.

The document illustrates the method with an example of historical high and low frequencies and suggests using the estimates to form a directional bias, guide stop placement, or align lower-timeframe setups with a higher-timeframe view. These figures are conditional historical counts, not a guarantee about the next candle. No independent validation, detailed test period, or evidence of net profitability after trading costs is provided, so the displayed probabilities should be treated as descriptive estimates rather than calibrated forecasts.

Key ideas

• The indicator counts level hits separately after bullish and bearish candles.
• It converts historical hit counts into percentages for levels above prior highs and below prior lows.
• The level spacing and displayed number of levels are configurable.
• The author suggests using the estimates for directional bias and stop placement.
• Historical frequencies do not guarantee future breakouts, and the document offers no independent profitability validation.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.