Trading View: price and volume to identify potential reversal points in the market

 

This TradingView script is an indicator that looks for certain conditions in price and volume to identify potential reversal points in the market. Let's break down the script step by step:

1. Script Header:

   pinescript
   //@version=5
   indicator("Custom Script", shorttitle="CS", overlay=true)
   

   This part specifies the Pine Script version and sets up the indicator with a title ("Custom Script"), short title ("CS"), and it is set to overlay on the price chart.

2. Input Parameters:

   pinescript
   atrAvgMultiple = input(2.5, title="ATR Multiple", type=input.float)
   atrAvgLength = input(14, title="ATR Length", type=input.integer)
   atrAvgType = input(averageType.WEIGHTED, title="ATR Type", type=input.source)
   
   volAvgMultiple = input(1.25, title="Volume Multiple", type=input.float)
   volAvgLength = input(20, title="Volume Length", type=input.integer)
   volAvgType = input(averageType.SIMPLE, title="Volume Type", type=input.source)
   
   wickPercent = input(0.10, title="Wick Percentage", type=input.percent)
   percentRetrace = input(0.40, title="Percentage Retrace", type=input.percent)
   
   showRetraceLine = input(true, title="Show Retrace Line", type=input.bool)
   extendRetraceLine = input(true, title="Extend Retrace Line", type=input.bool)
   extendLength = input(100, title="Extend Length", type=input.integer)
   
   useAlerts = input(true, title="Use Alerts", type=input.bool)
   

   These lines define various input parameters that allow the user to customize the behavior of the indicator, such as ATR settings, volume settings, wick percentage, percentage retrace, etc.

3. Conditions:

   pinescript
   wrb = trueRange(high, close, low) >= atr(atrAvgLength, atrAvgType) * atrAvgMultiple
   highVol = volume >= ta.sma(volume, volAvgLength) * volAvgMultiple
   downDay = close < open
   topWickSize = downDay ? high - open : high - close
   bottomWickSize = downDay ? close - low : open - low
   barSize = high - low
   
   topWickPercent = topWickSize / barSize
   bottomWickPercent = bottomWickSize / barSize
   meetsWickPercent = (downDay and bottomWickPercent <= wickPercent) or (not downDay and topWickPercent <= wickPercent)
   
   meetsCriteria = wrb and meetsWickPercent and highVol
   

   These lines calculate various conditions related to the price and volume. It checks for Wide Range Bars (wrb), high volume, and certain wick percentage conditions.

4. Signals:

   pinescript
   DownSignal = downDay and meetsCriteria
   UpSignal = not downDay and meetsCriteria
   

   These lines define signals (DownSignal and UpSignal) based on the calculated conditions.

5. Retrace Calculation:

   pinescript
   retraceAmt = barSize * percentRetrace
   ret = DownSignal and showRetraceLine ? low + retraceAmt : UpSignal and showRetraceLine ? high - retraceAmt : extendRetraceLine and (DownSignal or UpSignal) ? ret[1] : na
   

   It calculates the retracement levels based on the signals and user settings.

6. Retrace Bar Index:

   pinescript
   ret_bar = DownSignal and showRetraceLine ? bar_index : UpSignal and showRetraceLine ? bar_index : ret_bar[1]
   

   It keeps track of the bar index where a retracement line is drawn.

7. Plotting:

   pinescript
   retrace = bar_index >= ta.highest(ret_bar) ? ret : na
   plot(retrace, color=color.yellow, style=plot.style_dashes)
   

   It plots the retracement lines on the chart based on the conditions and user settings. The retracement lines are only plotted on the bars where the retracement level is the highest within the specified length.

In summary, this script aims to identify potential reversal points based on certain price and volume conditions, and it plots retracement lines on the chart accordingly. Users can customize the indicator's behavior using the input parameters.