False-Breakout Reversal Signals from Wide Candles
Summary
This indicator highlights possible reversals after price moves beyond a recent high or low and then closes back toward the opposite end of a wide candle. A long signal requires a candle range larger than a multiple of its recent average range, a low below the prior lookback lows, and a close in the upper portion of that candle. A short signal mirrors these conditions at recent highs, with a close near the candle low.
The lookback, average-range period, range multiple, and close-position threshold are adjustable. The script can mark signal candles, show recent extremes, and create alerts; the accompanying description gives example settings and notes that those settings differ from the defaults. This is a visual signal tool, not a tested trading system: the document supplies no performance statistics, entry execution rules, stop placement, or evidence that signals predict profitable reversals. Candles that meet the filters identify potential false breaks, not confirmed reversals.
Key ideas
- Signals require a candle range at least as large as a chosen multiple of its recent average range.
- A long setup undercuts prior lows but closes near the candle high, while a short setup exceeds prior highs but closes near the candle low.
- Lookback length and candle-range filters control how selective the signals are.
- Optional chart markings and alerts support monitoring, but the document gives no evidence of trading performance.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.