InverseReaction - MetaTrader 5 Script - MQL5 #1741

The idea behind the InverseReaction indicator is that the abnormal effects of price changes will be adjusted by the inverse reaction. You can see this in many examples, such as the Lehman Brothers case and the Flash Crash, and even in many small daily shocks (not necessarily booms or crashes).

It consists of two main arrays. One shows the gap-free price changes, the other shows the possible fluctuation limits (confidence levels) for each bar. This signal occurs when price changes exceed the possible fluctuation limits. Then you can expect the opposite reaction. See the chart below (EUR/USD, 1D).

Input parameters:

If you are curious about more details of the calculation process, see the commented code in the source about "Dynamic Confidence Levels".

Examples of the first three tips:

Attached to the picture are GBPUSD and M30 charts. The parameters are: confidence coefficient = 2.0, MA period = 5. The dots represent single-tail confidence levels, and the yellow dots represent horizontal breakouts (our signal). You can see the relationship with the Stochastic Oscillator here: When the Stochastic Oscillator reaches its limits, subsequent volatility breakouts in price changes will be excessive and may be responded to with a reverse reaction.

Attachment download

📎 inversereaction.mq5 (5.19 KB)

📎inversereaction_new.mq5 (5.91 KB)

Source: MQL5 #1741