Three Bar Reversal Pattern [ActiveQuants]

This indicator identifies bullish and bearish three-bar reversal patterns, offering traders a visual tool to spot potential trend reversals. By analyzing consecutive candlesticks, volume trends, and candlestick morphology, it highlights signals while filtering out false patterns. Ideal for traders using price action strategies, it simplifies pattern recognition and enhances decision-making with customizable parameters.


█ KEY FEATURES

Pattern Detection Logic:

• Bullish Reversals: Detects two consecutive bearish candles followed by a bullish candle that closes above the open of the first bearish candle.
  
  
• Bearish Reversals: Identifies two consecutive bullish candles followed by a bearish candle that closes below the open of the first bullish candle.
  

Volume Confirmation:

• Filters signals using a Volume SMA (user-defined length) to ensure reversals occur with above-average volume, adding validity to the pattern.
  

Candlestick Filtering:

• Shooting Star Filter: Discards bullish patterns if the third candle is a Shooting Star (body confined to the lower portion of the candle’s range, adjustable via Shooting Star Body Limit).
  
  
• Hammer Filter: Discards bearish patterns if the third candle is a Hammer (body confined to the upper portion of the candle’s range, adjustable via Hammer Body Limit).
  

Customizable Display:

• Toggle visibility of bullish/bearish patterns and customize their colors.
  
  
• Adjust the Show Last parameter to limit plotted labels to recent bars.
  

Alerts Integration:

• Separate Bullish/Bearish Alerts: Generate independent alerts for bullish and bearish patterns. Traders can selectively enable one or both alerts via TradingView’s alert system.
  
  
• Real-time notifications ensure you never miss a potential reversal signal.
  

█ CONCLUSION

The Three Bar Reversal Pattern Indicator streamlines the identification of reversal setups by combining candlestick patterns, volume analysis, and customizable filters. Its focus on price action dynamics makes it invaluable for traders seeking to capitalize on trend exhaustion or market sentiment shifts.


█ IMPORTANT NOTES

⚠ Use with Confluence: Reversal signals should be validated with additional tools like support/resistance levels, trendlines, or momentum oscillators.

⚠ Adapt Parameters: Adjust Volume SMA Length, Show Last, and body limits (Shooting Star Body Limit and Hammer Body Limit) to suit your timeframe and asset volatility.


█ RISK DISCLAIMER

Trading involves significant risk, and you may lose capital. Past performance is not indicative of future results. This tool provides informational signals only and does not constitute financial advice. Use it at your own risk and consult a qualified financial professional before making trading decisions.


Incorporate this indicator into your strategy to refine reversal entries, manage risk, and align with market momentum.

📈 Happy trading! 🚀