Trend Reversal Confluence

The "Trend Reversal Confluence Indicator" I just made is designed to identify potential trend reversals by looking for a strong alignment (confluence) of signals from three different technical indicators:

MACD (Moving Average Convergence Divergence): This indicator is used to detect shifts in momentum.

A bullish MACD signal occurs when the MACD line crosses above its signal line.

A bearish MACD signal occurs when the MACD line crosses below its signal line.

Stochastic Oscillator: This momentum indicator identifies overbought and oversold conditions, as well as potential shifts in momentum.

A bullish Stochastic signal is typically a crossover of the %K line above the %D line, especially when both are coming out of oversold territory (below 20).

A bearish Stochastic signal is a crossover of the %K line below the %D line, especially when both are coming out of overbought territory (above 80).

ADX (Average Directional Index): This indicator measures the strength of a trend.

For reversal signals, the indicator looks for the ADX to be below a certain threshold (e.g., 25 by default). This suggests that the current trend is weak or the market is ranging, making it a more opportune time for a reversal to occur rather than a continuation of a strong trend.

How Confluence is Defined (Simplified for Debugging):

Currently, for debugging purposes, the indicator's confluence for a signal is simplified to:

Bullish Reversal: When the MACD line crosses above its signal line AND the Stochastic %K line crosses above its %D line.

Bearish Reversal: When the MACD line crosses below its signal line AND the Stochastic %K line crosses below its %D line.

Original Confluence (Commented Out in the Code):

The original, more stringent confluence conditions (which are currently commented out in the Canvas but can be reactivated) also included:

For Bullish Reversal: The Stochastic %K and %D lines also needed to be below the oversold level (e.g., 20) when the crossover occurred, and the ADX needed to be below the adxThreshold.

For Bearish Reversal: The Stochastic %K and %D lines also needed to be above the overbought level (e.g., 80) when the crossover occurred, and the ADX needed to be below the adxThreshold.

When these combined conditions are met, the indicator plots "Reversal Up" (▲) or "Reversal Down" (▼) labels directly on your chart, indicating a strong confluence of factors suggesting a potential trend change. You can also see the individual indicator plots (MACD, Stochastic, ADX) on separate panes to understand the components of the signal.