Weighted Price Action: Comparing Recent Bullish and Bearish Events

Summary

The indicator measures bullish and bearish price action over a configurable lookback of p bars. It counts eight events: candle direction, higher or lower highs and lows than the prior bar, and whether the close lies in the upper or lower half of the candle’s range. Each event receives more weight when it occurred more recently, producing separate upward and downward totals.

The displayed lines subtract the smaller total from both totals, making the larger side stand out as recent dominance. Optional weighted-average lines smooth these values over half the lookback period, with the stated tradeoff of added lag. Users can toggle the raw lines, averages, and event types. A rising smoothed bullish line is interpreted as strengthening recent bullish action, with the bearish line read correspondingly. These are directional descriptions, not validated entry rules; the document supplies no performance tests and does not discuss edge cases such as zero-range candles.

Key ideas

• The indicator scores eight bullish or bearish candle and range events over a configurable lookback.
• More recent events contribute more to each directional score than earlier events.
• Subtracting the lower score from both totals highlights the dominant direction.
• Optional weighted averages smooth the scores but add lag.
• The indicator’s directional readings are not supported by backtest evidence or full trading rules.

Tags

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