Bounce Reversal Signal

The signal identifies potential bounce reversals — key points where a trend is likely to reverse after a temporary price bounce. This signal is particularly valuable because it combines multiple conditions, making it highly selective and targeted, focusing on strong trend reversals rather than minor fluctuations.

What It Detects

The function tracks for both bullish and bearish reversals. For each, it checks:

Bullish Bounce Reversal

• Cross Patterns: Price dips below the EMA25 and then moves back above within the last 3 candles (upward cross after a downward cross).
• EMA Hierarchy: Price is above EMA200, with EMA25 > EMA100 > EMA200 (suggesting a healthy uptrend).
• ADX Strength: The ADX value is above 30, confirming the trend’s strength.
• Price Positioning: For the past 5 candles, the price has remained above EMA100, ensuring a consistent upward bias.

Bearish Bounce Reversal

• Cross Patterns: Price moves above the EMA25 and then drops back below within the last 3 candles (downward cross after an upward cross).
• EMA Hierarchy: Price is below EMA200, with EMA25 < EMA100 < EMA200 (indicating a downtrend).
• ADX Strength: The ADX value is above 30, signaling a strong trend.
• Price Positioning: For the last 5 candles, the price has stayed below EMA100, confirming a consistent downward movement.

Why It’s Powerful

The Bounce Reversal Signal’s strength lies in its comprehensive conditions:

• Multi-Indicator Confirmation: This setup requires multiple signals to align — EMA positioning, recent cross patterns, and ADX trend strength — which minimizes false positives.
• Reliability in Strong Trends: By enforcing a minimum ADX threshold, this signal is tuned to only trigger during strong trends, filtering out weaker reversals.
• Adaptive Signal Timing: With a short detection window (last 3-5 candles), the signal identifies reversals as they begin, providing timely entry points for traders.

This combined approach makes the Bounce Reversal Signal ideal for traders looking to enter high-probability reversals in established trends.