Reversal Probability Zone & Levels

The Reversal Probability Zone & Levels tool allows traders to identify a zone starting from the last detected reversal to highlight the probability of where the next reversal would be from a price and time perspective.

Price and time levels within the zone are displayed for up to 4 percentiles defined by the user.

Usage

By default, the tool displays a zone with the 25th, 50th, 75th and 90th percentiles on both the price and time axis, indicating where, when and how many of the past reversals have occurred.

Traders can select the length for swing detection and the maximum number of reversals for probability calculations. The tool considers both bullish and bearish reversals separately, which means that if the last reversal was a swing high, the zone would show the probabilities for the last defined Maximum reversals

The Maximum reversals value has a direct impact on the probabilities, the more data traders use the more significant the result, probabilities over 10 occurrences are far weak compared to probabilities over 1000 occurrences.

Percentiles

Traders can fine-tune the percentile parameters in the settings panel.

A given percentile means that the number of occurrences in the data set is less than or equal to the percentile.

In English, this means

• Percentile 20th: 20% of the occurrences are less than or equal to this value, so 80% of the occurrences are greater than this value.
• Percentile 50th: 50% of the occurrences are below and 50% are above this value.
• Percentile 80th: 80% of occurrences are lower than or equal to this value, so 20% of occurrences are greater than this value.

Normalize data

The Normalize Data feature allows traders to make an apples to apples comparison when we have a lot of historical data on high timeframe charts, using returns between swings instead of raw price.

Display Style

By default, the tool has the No overlapping feature enabled to display a clean chart, traders can turn it off, but this can fill the chart with too much information and barely see the price.

Traders can enable/disable settings to show only the last zone and the swing markers on the chart.

Settings

• Swing Length: The maximum length in bars used to identify a swing
• Maximum Reversals: Maximum number of reversals included in calculations
• Normalize Data: Use returns between swings instead of raw price
• Percentiles: Enable/disable each of the four percentiles and select the percentile number, line style, colors, and size

Style

• No Overlapping Zones: Enable or disable the No overlap between zones feature
• Show Only Last Zone: Enable/disable display of last zone only
• Show Marks: Enable/disable reversal markers