Indicators Description

1. Component Deconstruction¶

Heikin Ashi (HA) Data¶

• Specific Configuration: The script does not calculate Heikin Ashi values from standard ohlc data. Instead, it uses a direct data request via ticker.heikinashi(syminfo.tickerid) and request.security(). This ensures it retrieves the broker’s native HA values for the current symbol and timeframe, which are then deconstructed into haOpen, haHigh, haLow, and haClose.

• Functional Modification: The script performs a morphological analysis of the HA candles. It does not use them for visualization but as a source for quantitative data points. The core logic is built upon derived boolean values and numerical properties of these candles, such as:

  • haSize: The absolute body size (math.abs(haClose - haOpen)).

  • isHaBull/isHaBear: The direction of the candle body.

  • noWickBull/noWickBear: A boolean test for the absence of a lower wick on a bullish candle (haOpen == haLow) or an upper wick on a bearish candle (haOpen == haHigh), indicating strong, unopposed momentum.

Average Directional Index (ADX)¶

• Specific Configuration:

  • Indicator: ta.dmi which returns the Positive Directional Indicator (+DI), Negative Directional Indicator (-DI), and the ADX.

  • Lookback Period: The length for both the DI calculation and the subsequent ADX smoothing is set by adxLen, with a default of 7. This is a short period, making the ADX highly reactive to recent changes in trend strength.

  • Price Source: The underlying ta.dmi function implicitly uses standard price inputs for its True Range and Directional Movement calculations.

• Functional Modification: There is no mathematical modification to the ADX formula itself. Its function is purely as a binary state filter. The script does not analyze the ADX’s slope or its relationship with the +/-DI lines; it only checks if adxValue is above a static threshold (adxThresh).

Average True Range (ATR)¶

• Specific Configuration:

  • Indicator: ta.atr.

  • Lookback Period: The smoothing period is defined by atrLen, with a default of 14.

  • Smoothing Method: The standard Pine Script ta.atr uses a Running Moving Average (RMA).

• Functional Modification: The ATR value is not modified. It is used as a dynamic unit of volatility to calculate exit price targets. Its value is captured at the bar preceding the entry (atrValue[1]) to establish fixed stop-loss and take-profit levels, preventing the targets from shifting with market volatility after a position is opened.

2. Logic Layering & Confluence¶

The script’s engine is a hierarchical filtering system designed to isolate a specific “momentum ignition” event. The logic is layered to progressively increase signal confidence.

• Layer 1: Reversal Prerequisite (The Flip)

  • Interaction Dynamic: The engine first looks for a change of state. The colorFlipBull and colorFlipBear variables require the candle at [3] (three bars prior to the trigger candle) to be of the opposite color.

  • Hierarchical Filtering: This acts as the initial gatekeeper. It ensures the subsequent pattern is a reversal and not merely a continuation of an existing trend, focusing the strategy on inflection points.

• Layer 2: Trend Regime Filter (The Gatekeeper)

  • Interaction Dynamic: A Threshold Cross. The adxValue must be greater than the adxThresh input (default: 20.0).

  • Hierarchical Filtering: The ADX acts as a macro-level “regime filter.” If the market lacks sufficient directional energy (i.e., is in a chop or consolidation phase), the ADX will be below the threshold, and the entire HA pattern analysis is disregarded. This is designed to improve the signal-to-noise ratio by only permitting trades in environments capable of supporting a momentum burst.

• Layer 3: Momentum Ignition Pattern (The Trigger Sequence)

  • Interaction Dynamic: This is a strict Pattern Recognition sequence based on the confluence of three distinct HA candle properties across three consecutive bars.

    1. Directional Unison: All three candles in the sequence ([2], [1], and the current bar [0]) must be bullish (for a long) or bearish (for a short).

    2. Momentum Confirmation: All three candles must be “marubozu-style” in the direction of the trend (no lower wicks for longs, no upper wicks for shorts). This signals a complete lack of opposition.

    3. Momentum Acceleration: The body size of each candle must be greater than the previous one (haSize[1] > haSize[2] and haSize > haSize[1]). This confirms that the new momentum is not only present but actively strengthening.

The final signal is a product of confluence: the reversal prerequisite is met, the ADX confirms a trending regime, and the three-bar HA sequence confirms an accelerating, unopposed momentum ignition.

3. The Execution Engine¶

Trigger Conditions¶

• Boolean Logic (Long Trigger): A true signal is generated on the current bar if and only if all the following conditions are met:

  1. The HA candle 3 bars ago was bearish (isHaBear[3]).

  2. The HA candle 2 bars ago was bullish AND had no lower wick (bull1).

  3. The HA candle 1 bar ago was bullish, had no lower wick, AND its body was larger than the candle from 2 bars ago (bull2).

  4. The current HA candle is bullish, has no lower wick, AND its body is larger than the candle from 1 bar ago (bull3).

  5. The current ADX(7) value is greater than adxThresh (20.0).

• Boolean Logic (Short Trigger): A true signal is generated on the current bar if and only if all the following conditions are met:

  1. The HA candle 3 bars ago was bullish (isHaBull[3]).

  2. The HA candle 2 bars ago was bearish AND had no upper wick (bear1).

  3. The HA candle 1 bar ago was bearish, had no upper wick, AND its body was larger than the candle from 2 bars ago (bear2).

  4. The current HA candle is bearish, has no upper wick, AND its body is larger than the candle from 1 bar ago (bear3).

  5. The current ADX(7) value is greater than adxThresh (20.0).

Exit Conditions & Mathematical Constants¶

The script employs two mutually exclusive exit mechanisms, controlled by the useAtr boolean input.

• Mechanism 1: ATR-Based Exits (useAtr = true)

  • Take Profit: Calculated as Entry Price + (ATR[1] * tpMult). The default tpMult of 1.0 sets the take profit at a distance of 1 ATR from the entry price.

  • Stop Loss: The effective stop loss is the tighter of two calculations:

    1. Volatility Stop: Entry Price - (ATR[1] * slMult). The default slMult of 2.0 sets a volatility-based stop at a distance of 2 ATRs, establishing a default 1:2 Reward-to-Risk ratio.

    2. Catastrophe Stop (“The Plug”): Entry Price * (1 - thePlug / 100). The default thePlug of 1.0 sets a hard stop loss at 1% below the entry price.

  • Logic: The final stop loss (longSL) is determined by math.max(atrStop, plugStop). This means the stop is placed at the price level closest to the entry, effectively using “The Plug” as a maximum risk cap that overrides the ATR calculation if market volatility is exceptionally high.

• Mechanism 2: Fixed 1-Bar Exit (useAtr = false)

  • Logic: If a position is open, the strategy.close() command is issued. Due to the setting process_orders_on_close = false, an order generated during a bar is executed at the open of the next bar.

  • Execution: When a long entry is triggered on Bar X, the strategy.close() command is also processed on Bar X. This places a market order to close the position at the open of Bar X+1. This results in a fixed holding period of exactly one bar.

  • Mathematical Constants: This mechanism does not use any multipliers. The exit is purely time-based.