Forecasting Price Paths from Historical Wick-to-Body Analogues

Summary

This indicator searches historical candles for examples whose wick-to-body structure resembles the latest candle, then projects the average price path that followed those analogues. Users can compare general wick length, the upper wick, the lower wick, or body size relative to the full candle range. An optional direction filter restricts matches to candles with the same bullish or bearish sign. The projected line extends for a chosen number of bars, while segment colors represent dispersion among the matched paths: tighter agreement is presented as greater confidence.

The matching tolerance adjusts according to the number of analogues found, and the chart can mark matched windows and display their ratios. The document describes the procedure and provides implementation code, but offers no backtest, benchmark, or evidence that the projected paths predict returns. Results depend on ratio choice, lookback, tolerance, market regime, and the number and quality of matches. Dispersion measures agreement within the selected historical sample; it does not establish forecast reliability or account for trading costs.

Key ideas

• The indicator finds past candles with wick-to-body ratios near the current candle’s ratio.
• Four ratio modes emphasize total wicks, upper wicks, lower wicks, or body size within the candle range.
• A direction setting can require matched candles to share the current candle’s bullish or bearish direction.
• The forecast averages subsequent historical price paths and colors segments according to dispersion among them.
• The supplied document gives no performance test establishing predictive value or trading profitability.

Tags

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