Forex Master Pattern Screener 2

3 בינו׳

Overview
The Forex Master Pattern Screener 2 is based on the Master Pattern, which includes contraction, expansion, and trend phases. This indicator is designed to identify and visualize market volatility, market phases, multi-timeframe contractions, liquidity points, and pivot calculations. It provides a clear image of the market's expansion and contraction phases. It's based on an alternative form of technical analysis that reveals the psychological patterns of financial markets through three phases.

Unlike the other master pattern indicators that just use highs and lows and aren't as accurate for finding contractions, this one uses actual measures of volatility to find extremely low levels of volatility and has customizable parameters depending on what you want to do.



What is the Forex Master Pattern?
The Forex Master Pattern is a framework that revolves around understanding market cycles, comprising the three main phases: contraction, expansion, and trend.

1. Contraction Phase: During this phase, the market has low volatility and is consolidating within a narrow range. Institutional volume tends to be low, and it's suggested to avoid trade entries during this period.
   
2. Expansion Phase: Volatility starts to increase, and there start to be bigger moves in price. Institutional traders start accumulating positions in this phase, and they might manipulate prices to draw in retail traders, creating liquidity for their own buying or selling goals.
   
3. Trend Phase: This final phase completes the market cycle. Institutional traders begin taking profits, leading to a reversal. This triggers panic among retail traders, resulting in liquidations and stops. This generates liquidity for institutional traders to profit, leaving retail traders with overvalued positions.
   

Value Line:
The "value line" acts as the fair value zone or the neutral belief zone where buyers and sellers agree on fair value. It can be likened to the center of gravity and is created during contraction zones.



Applications:

• Identifying these phases and understanding the value lines can help traders determine the market's general direction and make better trading decisions.
  
• This isn't a strategy but a concept explaining market behavior, allowing traders to develop various strategies based on these principles
  
• The contractions, which are based on volatility calculations, can help you find out when big moves will occur, known as expansions.
  
  How traders can use this indicator1. Identifying Market Phases:
  Contraction Phase: Look for periods where the market has low volatility and is contracting, indicated by a narrow range and highlighted by the contraction box. During this phase, traders prepare for a breakout but usually avoid making new trades until a clearer trend emerges.
  Expansion Phase: When the indicator signals an expansion, it suggests that the market is moving out of consolidation and may be beginning a new trend. Traders might look for entry points here, anticipating a continuation of the trend.
  Trend Phase: As the market enters this phase, traders look for signs of sustained movement in one direction and consider positions that benefit from this trend.
  
  2. Multi-Timeframe Analysis:
  By looking at multiple timeframes, traders can get a broader view of the market. For instance, a contraction phase in a shorter timeframe within an expansion phase in a longer timeframe might suggest a pullback in an overall uptrend. This indicator comes with a MTF contraction screener that is customizable.
  
  2. Fair Value Lines:
  The fair value acts like a "center of gravity.". Traders could use this as a reference point for understanding market sentiment and potential reversal points. This indicator shows these values in the middle of the contraction boxes.
  
  3. Volatility Analysis:
  This indicator's volatility settings can help traders understand the market's current volatility state. High volatility indicates a more active market with larger, faster moves, while low volatility might suggest caution and tighter stop-losses or take-profits. If volatility is contracting, then an expansion is imminent. This indicator shows the volatility with percentile ranks in 0-100 values and also alerts you when volatility is contracting, aka the contraction phase.
  
  Volatility Calculations:
  This indicator uses a geometric standard deviation to measure volatility based on historical price data. This metric quantifies the variability of price changes over a specified lookback period and then computes a percentile rank within a defined sample period. This percentile calculation helps evaluate the current volatility compared to historical levels.
  
  Based on the percentile rank, the indicator sets thresholds to determine whether the current volatility is within a range considered "contraction" or not. For example, if there are really low levels of volatility on the percentile rank, then there is currently a contraction phase. The indicator also compares the volatility value against a moving average, where values above the current moving average value signal the expansion phase.
  
  Multi-Timeframe Analysis (MTF):
  This indicator comes with a multi-timeframe table that shows contractions for 5 different timeframes, and the table is customizable.
  
  Bands:
  This indicator comes with bands that are constructed based on the statistical calculations of the standard deviation applied to the log-transformed closing prices. It is commonly assumed that the distribution of prices fits some type of right-skewed distribution. To remove most of the skewness, you can use a log transformation, which makes the distribution more symmetrical and easier to analyze, thus the use of these bands. These bands are in the 2 standard deviation range. You can use these bands to trade at extreme levels. The band parameter is based on the contraction volatility lookback, which is in the Volatility Model Settings tab. Ways the bands could be used with the contractions:1. Identifying Breakout trades:
• Contraction Zones: These zones indicate periods of low volatility where the market is consolidating. There are usually narrow price ranges, which are considered a build-up phase before a significant price move in any direction.
  
• Bands: When the contraction zone occurs, you might notice the bands tightening around the price on smaller lookback periods, reflecting the decreased volatility. A continuous widening of the bands could then signal the beginning of an expansion phase, indicating a potential breakout opportunity.
  
  2. Enhancing Trade Timing:
• Before the Breakout: During the contraction phase, the bands might move closer together, reflecting the lower volatility. You can monitor this phase closely and prepare for a potential expansion. The bands can provide additional confirmation; for instance, a price move toward one of the bands might show an extreme occurrence and might show what the direction of the breakout could be.
  
• After the breakout: Once the price breaks out of the contraction zone and goes to the expansion phase, and if it coincides with the bands widening significantly, it could reinforce the strength and potential sustainability of the new trend, providing a clearer entry.
  
  3. Price-touching bands during a contraction:
• If the price repeatedly touches one of the bands during a contraction phase, it might suggest a buildup of pressure in that direction. For example, if the price is consistently touching the upper band even though the bands are narrow, it might suggest bullish pressure that could occur once the expansion phase begin.
  
  4. Price at the band extreme levels during Expansion:
  If the price is at the extreme levels of the bands once the expansion phase occurs, it might indicate unsustainable levels and a low probability of the price continuing beyond those levels. Potentially signaling that a reversal will occur. Some trades could use these extremes to place entries during the expansion phases.
  
  Liquidity Levels:
  This script comes with liquidity points, whose functionality goes towards identifying pivotal levels in price action, focusing on swing highs and swing lows in the market. These points represent areas where significant buying (for swing lows) or selling (for swing highs) activity has occurred, implying potential levels or resistance in the price movement.
  
  These liquidity points, often identified as highs and lows, are points where market participants have shown interest in the past. These levels can act as psychological indications where traders might place orders, leading to increased trading activity when these levels are approached or breached. When used with the Forex Master Pattern phases, liquidity levels can enhance trades placed with this indicator. For instance, if the market is expanding and approaches a significant liquidity level, there might be a higher chance of a breakout or reversal, showing a possible entry or exit point.
  
  Liquidity Levels in the Contraction Phase:
• Accumulation and Distribution: During the contraction phase, liquidity levels can indicate where huge positions are likely accumulating or distributing quietly. If price is near a known liquidity level and in a contraction phase, it might suggest that a large market player is building a position in anticipation of the next move.
  
• Breakout Points: Liquidity levels can also give clues about where price could go after the breakout from the contraction phase. A break above a liquidity level might indicate a strong move to come as the market overcomes significant selling pressure.
  Liquidity Levels in Expansion Phase:
• Direct Confirmation: As the expansion phase begins, breaking through liquidity levels can confirm the new trend's direction. If the price moves past these levels with huge volume, it might indicate that the market has enough momentum to continue the trend.
  
• Target Areas: Liquidity levels can act as target areas during the expansion phase. Traders using this indicator could look to take profits if the price approaches these levels, possibly expecting a reaction from the market.