Double Trend Exhaustion™ Indicator
It helps technical traders time market entry and exit points by identifying periods of trend exhaustion and potential reversals. By tracking shifts in intraday highs and lows, it offers early signals for short-term price action, making it a powerful tool for predicting market turning points.
Mostly used on: MQL5, QuantConnect
As momentum begins to build, a dynamic countdown -3, -2, -1 starts to appear, signaling that the market is shifting. This early-stage indicator tracks sustained directional pressure, and as the trend intensifies over nine consecutive periods, it reaches a critical exhaustion point, ready to trigger a powerful reversal signal.
As shown in the graph, the -3, -2, -1 countdown progressively builds up, leading to a signal trigger as momentum exhaustion is confirmed.
When a buy or sell signal is triggered, evaluate if the corresponding candlestick breaks through the -3 and -2 levels. If it does, the setup aligns with optimal trend exhaustion parameters, signaling a high-probability reversal. If not, the market may sustain its directional momentum, indicating the possibility of continued trend progression before a potential reversal.
As demonstrated in the graph, the second buy signal represents an optimal setup, where the candlestick breaks through the -3 and -2 levels, confirming a high-probability reversal under current market conditions. While the first buy signal is not optimal, since the candlestick did not break through the -2 level.
The third step involves validating the trend reversal signal by analyzing the three subsequent candlesticks. If 1, 2, or 3 appear, it signifies residual momentum persistence, suggesting the trend may extend before exhaustion. However, if no continuation markers emerge, it confirms a definitive momentum shift, reinforcing the reversal signal with high statistical confidence.
The graph illustrates a sell signal followed by the absence of 1, 2, or 3, confirming an immediate trend reversal upon signal activation.
Sometimes, the trend persists despite a signal, especially in high-volatility, emotion-driven markets like crypto. To counter this, a small exclamation mark appears after 1, 2, 3, marking a chase-back phase. The counter then continues, and if the trend sustains for 2×9 = 18 consecutive periods, the reversal signal re-triggers. Hence, the name Double Trend Exhaustion.
The graph shows an exmaple of the chase-back signal. After an initial false alert, the 1, 2, 3 markers confirm momentum persistence, and the exclamation mark highlights the moment to re-engage with the trend.