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Probability Box Rule of Thirds [PPI]█ Probability Box Rule of Thirds The Probability Box Rule of Thirds , is a visual indicator that helps traders identify possible overbought and oversold conditions. It does this by dividing the price range – highest high minus the lowest low of a given lookback period or date range – into thirds. Each third has distinct probability characteristics and when combined represent a probability box. We have spent years refining the probability box concept, and have previously published a How To on Trading View – "How to Trade Probability Ranges – The Critical Rule of 1/3" which can be found here: To quickly summarize the How To – when using the Rule of Thirds , you are using a combination of statistics, probabilities of success, and prior price action to determine when to enter a trade. The visual range division helps remove subjectivity and clearly shows when the trading odds are stacked in your favor. By identifying and taking higher probability trades, you have a higher chance of success as trading is all about probability and risk management. Implementing the Rule of Thirds starts with finding an instrument that is consolidating and identifying the nearest important support and resistance levels based on your targeted trading timeframe or lookback period. The range between the support and resistance levels is divided into thirds to form three zones within the consolidation range. When going LONG , you want to BUY in the bottom third of the range. Once you buy, your objective is to hold during the middle third and sell when the price enters the top third. When you buy in the lower third, there's a 66.6% probability of success. If you buy in the middle third, you only have a 50% / 50% chance of success. Going long in the top third of the range gives you a 33.3% chance of success as you are already close to the identified resistance level. When going SHORT , the sequence and odds are reversed. You want to SELL in the top third of the range, hold the middle third and exit in the bottom third of the range. This gives you a 66.6% chance of success when entering in the top third, a 50% / 50% chance when entering in the middle third, and a 33.3% chance in the bottom third given you are already close to the identified support level. When the price lies in the middle third, the even 50% / 50% odds provide no probability edge and a trader is better off waiting until the price reaches the upper or lower thirds of the price range. The Rule of Thirds allows us to quickly visually evaluate trades based on probabilities, selectively enter trades that have the highest odds of success, and avoid likely losing trades. The Rule of Thirds gives you confidence to hold trades based on prior trading ranges and provides clear levels where the prices are likely to either reverse or start trending. The Probability Box Rule of Thirds automatically implements the first two steps of the Rule of Thirds by using the highest high and lowest low of a given lookback period to identify the support and resistance levels, and automatically divides the range into thirds. The rest of the Rule of Thirds rules remain the same. Just having the price within the bottom thirds or top thirds, however, does not mean the price will immediately reverse. The GE chart below is an example of a stock that remained 'stuck' in the upper thirds of the price range for an extended amount of time: And the CVS chart below is an example where the price is 'stuck' in the lower thirds of the price range: While the price is in the upper or lower thirds, it is very important that the trader should use other indicators to identify when a significant trend reversal occurs. Once a trend reversal event happens, the trader either enters a trade AND/OR exits a trade if already in one. When the price exceeds the bounds of the probability box, there are three possible outcomes – a strong continuation trend, the price consolidates around the probability box edge, or a trend reversal. Your favorite indicators will help determine which event is happening. The CVS chart above is a good example of the probability box being exceeded with the last bar. The price exceeding the price range is temporary event as the price range will expand to encompass the revised price range on the next trading day. █ Indicator Features Each supported timeframe – Monthly, Weekly, and Daily – allows the selection of an appropriate lookback period for your trading style. The defaults are a good starting point for swing trading and long-term investing. You many need to experiment to find the optimal lookback period for your trading style. Even if you only day trade, the Probability Box Rule of Thirds with the appropriate lookback periods can help you visualize the bigger picture of where the instrument is heading. When viewing the charts, you can find the currently selected lookback period above the upper edge of the price range. The indicator will display a dotted yellow line at 50% of the price range and show the line's value when requested. The visibility of the actual thirds and border price values are controlled by the " Show Probability Box Values " checkbox. You may need to expand the chart's right margin to see the values. The " Show Internal Labels " checkbox controls the display of the internal ⅓ Division labels and the percentage odds, along with the 50% label. This option by default is set to off. The " Show Error Messages " checkbox controls the display of error messages and by default is turned on. Turn off to prevent error messages from being shown on intraday timeframes. Save as indicator default to prevent having to turn off this setting each time added to chart. The color and transparency controls allow the user to modify the colors used for each third. The default settings are optimized for use with a DARK background. █ Implementation Notes IMPORTANT - the Probability Box Rule of Thirds is set up to only handle Monthly, Weekly and Daily charts. This is intentional as the indicator is designed to be used for safer multiple day and longer swing trades. When viewed on intraday charts, the indicator will be hidden. The Probability Box Rule of Thirds uses a rolling window of the equivalent number of bars for the lookback period rather than relying on the bar starting and ending dates. This allows the use of a standard number of days in the selected lookback window across various instruments and ensures fast, efficient calculations. The lookback periods are adjusted when non-standard timeframe multipliers are used – e.g., a 12M chart timeframe and a 3-year lookback period will result in a 3 bar lookback. Fractional bars in this calculation are rounded up and any incompatible lookback period and chart timeframe combination will generate a runtime error. In summary, the Probability Box Rule of Thirds automates and visually identifies overbought and oversold areas, which combined with the Rule of Thirds probability risk profiles, increases your odds of success through better trade selections and higher confidence in your trades. █ Disclaimer There is substantial risk in trading. Losses incurred in trading can be significant. Only trade with money you can afford to lose. We make no claims whatsoever regarding the impact of past or future performance on your trading results.
Pine Script™ indicator
by PowerIndicators
10
SuperTrend Support & Resistance(My goal creating this indicator) : Provide a way to categorize and label key structures on multiple time frames so I can create a plan based on those observable facts. The Underlying Concept / What is Momentum? The Momentum shown is derived from a Mathematical Formula, SUPERTREND. When price closes above Supertrend Its bullish Momentum when its below Supertrend its Bearish Momentum. On the first bar bearish momentum is detected a resistance Level is made at the highest point of the previous bullish condition. On the first bar bullish momentum is detected a support Level is made at the lowest point of the previous bearish condition. As I become a better analyst I will find better techniques and this source code may become open-source, but as of now it remains protected. This indicator scans for bullish & bearish Momentum on the Timeframes selected by the user and when there is a shift in momentum on any of those time frames (price closes below or above SUPERTREND ) it notifies the trader with a Supply or Demand level with a unique color and Size to signify the severity of said level. What is Severity? Severity is How we differentiate the importance of different Highs and Lows. If Momentum is detected on a higher timeframe the Supply or Demand Level is updated. The Color and Size representing that higher timeframe will be shown. Demand and Supply Levels made by higher Timeframes are more SEVERE then a demand level made by a lower Timeframe. Technical Inputs - If you want to optimize the rate of signals to better fit your trading plan you would change the Factor input and ATR Length input. Increase factor and ATR Length to decrease the frequency of signals and decrease the Factor and ATR Length to increase the frequency of signals. - to ensure the correct calculation of Support and Resistance levels change BAR_INDEX. BAR_INDEX creates a buffer at the start of the chart. For example: If you set BAR_INDEX to 300. The script will wait for 300 bars to elapse on the current chart before running. This allows the script more time to gather data. Which is needed in order for our dynamic lookback length to never return an error(Dynamic lookback length cant be negative or zero). The lower the timeframe the greater the amount of bars need. For Example if I open up a 30 sec chart I would enter 5000 as my BAR_INDEX since that will provide enough data to ensure the correct calculation of Support and Resistance levels. Time Frame Inputs - The indicator has 3 Time Frame Displays where you can choose how SEVERE You want the Supply and Demand Levels. For Example: 1min, 3min, 5min, 15 min Levels, 60 min levels Weekly Levels, etc.....The higher the Timeframe Selected the more SEVERE the Level. - Use the Amount of time Frames input to increase or limit the amount of time frames that will be displayed onto the chart. Display Inputs - The toggle (Trend or Basic) option Lets the trend determine the colors of the Support and Resistance Levels or Basic where the color is strictly based on if its a high or a low ( Trend = HH,HL,LL,LH) - Toggle options (Close) and (High & Low) creates Support and Resistance Levels using the Lowest close and Highest close or using the Lowest low and Highest high. Toggle on both or toggle off both in order to use both these values when determining the trend of your chart. For Example this would mean (Price has to close higher then the highest high. Not only make a higher high or a higher close) and the inverse (Price has to close lower then the lowest low. Not only make a lower low or a lower close) How Trend Is being Determined ? (Previous Supply Level > Current Supply Level ) if this statement is true then its s LH so the trend is bearish if this statement is false then its a HH so the trend is bullish (Previous Demand Level > Current Demand Level ) if this statement is true then its a LL so the trend is bearish if this statement is false then its a HL so the trend is bullish (Close > Current Supply Level ) if this statement is true technically price made a HH so the trend is bullish (Close < Current Demand Level ) if this statement is true technically price made a LL so the trend is bearish - Fully customize how you display and label Market Structure in specific timeframes. Line Length, Line Width, Line Style, Label Distance, Label Size, Label Background Size, and Background Color can all be customized. - Lastly Is the Trend Chart. To Easily verify the current trend of any timeframes displayed by this indicator toggle on Chart On/Off . You also get the option to change the Chart Position and the size of the Trend Chart *****The Current charts timeframe has to lower then a month to ensure correct calculation of Supply and Demand Levels***** How it can be used ? (Examples of Different ways you can use this indicator) : Easily categorize the severity of each and every Supply or Demand Level in the market (The higher the time frame the stronger the level) : Quickly Determine the trend of any Timeframe : Get a consistent view of a market and how different time frames are behaving but just use one chart. : Take the discretion from hand drawing support and resistance lines out of your trading : Find and categorize strong levels for potential breakouts : Trend Analysis, Use multiple time frames to create a narrative based on observable facts from these time frames : Different Targets to take money off the table : Use labels to differentiate between different trend line setups : Find Great places to move your stop loss too.
Pine Script™ indicator
by Who7is7Like7God
17