Geometric Pattern (Expo)
Find strong trends and reversals with our Geometric Pattern indicator.
Introduction
This indicator identifies strong trends and reversals. When the market enters a strong trend the likelihood of a reversal increases with the time we are in this state.
Depending on the settings used we can tune it to only identify reversal or strong trends.
This indicator will not give exact entry points, it rather shows us a market state. So when using this indicator we need to combine it with other methods.
Reversals
In the graph below we can see that when a green thick line is plotted the market is in a strong positive trend, hence we want to start looking for a potential short position.
When a red thick is plotted the market is in a strong negative trend, hence we want to start looking for a potential long position.
The background color displays the underlying trend.
The blue line in the indicator can be ignored. If you want you can hide the line in the setting panel.
What is important
Do only pay attention to the thick green/red lines and the background color.
Reversal Example
In this graph, we can see how powerful this indicator can be in identify potential reversals. Combine it with Support/Resistance and you will have a great strategy.
A Good Setup Idea
The idea is to source the indicator from a lower timeframe when we are charting on a higher timeframe, this enables us to display strong trends/reversals that occur on a lower timeframe in a higher timeframe. A perfect way to find retracements.
Settings:
The timeframe on the left chart | The timeframe on the right chart |
1 hour | 15 min |
For the right chart (15 min chart) please make the indicator faster, set the Pattern Strength to 100
Long - How it looks on the chart
We can see that the Geometric Pattern shows us potential retracements around the trend line.
Identify a trend in a higher timeframe, draw a trend channel.
Find Long entries when the price is at the lower trend line and when the Geometric pattern displays a red thick line.
Take profit when the price reaches the upper trend line.
Warning: In the right corner of the graph we get a red thick line, that indicates a potential retracement, however, we can clearly see that this happens at the upper trend line which does the setup invalid.
We do only take the signals if the price is at the lower trend line!
Short - How it looks on the chart
Maximize the use
Use this indicator to identify strong trends, and in a strong trend a reversal is likely, so use this indicator as a "heads up" that a reversal may come.
This is not an exact entry/exit indicator, use it with other methods to confirm your entry/exit.
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