Volume Energy Reservoirs [LuxAlgo]The Volume Energy Reservoirs indicator is a physics-inspired momentum tool based on a "capacitance" model that treats the market as a system storing potential energy during stability and releasing it as kinetic flow during high-volume trends.
🔶 USAGE
The indicator helps traders identify periods of market compression (Squeezes) and subsequent expansion. It provides a dual-view approach with an oscillator tracking energy flow and on-chart visuals highlighting price consolidation ranges and trend climaxes.
Energy Accumulation (The Box): When the yellow Energy Reservoir fills in the oscillator, a filled Squeeze Box appears on the chart. This represents the "charging" phase where the market is storing potential energy within a tight range.
Range Extension (The Lines): Once the energy building phase completes, the filled box stops, and two horizontal dashed Squeeze Extension Lines project from the box's high and low. These lines define the critical support and resistance levels established during the squeeze.
The Breakout: A breakout is confirmed when a candle closes above or below the extension lines. At this moment, the lines stop drawing, signaling that the stored energy has been released into kinetic momentum.
Trend Monitoring: Follow the Conviction Gradient on the background (default 75% transparency) and the vibrant Kinetic Aura in the oscillator to gauge the strength of the move.
Exhaustion (The Exit): Look for Exhaustion Bubbles on the chart. A Red bubble at a bullish peak or a Green bubble at a bearish trough indicates the trend's "fuel" is spent. Larger bubbles represent higher-volume climaxes.
🔶 DETAILS
The script utilizes a unique "Energy Reservoir" logic to quantify market state by using relative displacement math rather than absolute price values, making it adaptive across different asset classes.
🔹 Squeeze Mechanism
The system transitions through three distinct visual states:
Active Squeeze: A filled yellow box that dynamically expands its high and low boundaries as long as the "Energy Reservoir" is charging (Reservoir > 5).
Post-Squeeze Extension: Once the reservoir level drops, the box is locked. Two horizontal dashed lines extend to the right from the box's maximum high and minimum low.
Breakout Termination: The extension lines persist until the market price closes outside of the defined range, providing a clear visual of the "Range to Beat."
🔹 Exhaustion & Conviction
Exhaustion Bubbles: These signals are specifically coded to ignore consolidation zones, only appearing during active trends when momentum begins to fade at an extreme. Size is determined by relative volume.
Conviction Gradient: A thermal background heatmap (Teal for Bullish, Red for Bearish) that tracks trend conviction directly on the price chart. The default transparency is set to 75 to ensure a balance between visibility and chart clarity.
Kinetic Aura: A vertical gradient glow in the oscillator that scales with the asset's recent volatility and volume-weighted flow.
🔶 SETTINGS
🔹 Main Settings
Energy Horizon: The lookback period used to calculate the price midpoint and range stability for energy accumulation.
Energy Sensitivity: Adjusts how quickly energy is released during volume spikes. Higher values require more significant volume to discharge the reservoir.
🔹 Visual Settings
Highlight Squeeze Range: Toggles the drawing of the filled box and the subsequent extension lines on the chart.
Show Exhaustion Bubbles: Toggles the volume-weighted bubbles that appear during momentum extremes.
Show Conviction Gradient on Chart: Toggles the thermal background gradient on the main price chart.
Background Transparency: Adjusts the maximum opacity of the on-chart conviction gradient (Default: 75).
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