Heikin-Ashi Mean Reversion Oscillator [Alpha Extract]

The Heikin-Ashi Mean Reversion Oscillator combines the smoothing characteristics of Heikin-Ashi candlesticks with mean reversion analysis to create a powerful momentum oscillator. This indicator applies Heikin-Ashi transformation twice - first to price data and then to the oscillator itself - resulting in smoother signals while maintaining sensitivity to trend changes and potential reversal points.

🔶 CALCULATION

• Heikin-Ashi Transformation: Converts regular OHLC data to smoothed Heikin-Ashi values
  
• Component Analysis: Calculates trend strength, body deviation, and price deviation from mean
  
• Oscillator Construction: Combines components with weighted formula (40% trend strength, 30% body deviation, 30% price deviation)
  
• Double Smoothing: Applies EMA smoothing and second Heikin-Ashi transformation to oscillator values
  
• Signal Generation: Identifies trend changes and crossover points with overbought/oversold levels
  
  Formula:
  
  
• HA Close = (Open + High + Low + Close) / 4
  
• HA Open = (Previous HA Open + Previous HA Close) / 2
  
• Trend Strength = Normalized consecutive HA candle direction
  
• Body Deviation = (HA Body - Mean Body) / Mean Body * 100
  
• Price Deviation = ((HA Close - Price Mean) / Price Mean * 100) / Standard Deviation * 25
  
• Raw Oscillator = (Trend Strength * 0.4) + (Body Deviation * 0.3) + (Price Deviation * 0.3)
  
• Final Oscillator = 50 + (EMA(Raw Oscillator) / 2)
  

🔶 DETAILS Visual Features:

• Heikin-Ashi Candlesticks: Smoothed oscillator representation using HA transformation with vibrant teal/red coloring
  
• Overbought/Oversold Zones: Horizontal lines at customizable levels (default 70/30) with background highlighting in extreme zones
  
• Moving Averages: Optional fast and slow EMA overlays for additional trend confirmation
  
• Signal Dashboard: Real-time table showing current oscillator status (Overbought/Oversold/Bullish/Bearish) and buy/sell signals
  
• Reference Lines: Middle line at 50 (neutral), with 0 and 100 boundaries for range visualization
  
• Interpretation:
  
• Above 70: Overbought conditions, potential selling opportunity
  
• Below 30: Oversold conditions, potential buying opportunity
  
• Bullish HA Candles: Green/teal candles indicate upward momentum
  
• Bearish HA Candles: Red candles indicate downward momentum
  
• MA Crossovers: Fast EMA above slow EMA suggests bullish momentum, below suggests bearish momentum
  
• Zone Exits: Price moving out of extreme zones (above 70 or below 30) often signals trend continuation
  

🔶 EXAMPLES

• Mean Reversion Signals: When the oscillator reaches extreme levels (above 70 or below 30), it identifies potential reversal points where price may revert to the mean.
  
• Example: Oscillator reaching 80+ levels during strong uptrends often precedes short-term pullbacks, providing profit-taking opportunities.
  
• Trend Change Detection: The double Heikin-Ashi smoothing helps identify genuine trend changes while filtering out market noise.
  
• Example: When oscillator HA candles change from red to teal after oversold readings, this confirms potential trend reversal from bearish to bullish.
  
• Moving Average Confirmation: Fast and slow EMA crossovers on the oscillator provide additional confirmation of momentum shifts.
  
• Example: Fast EMA crossing above slow EMA while oscillator is rising from oversold levels provides strong bullish confirmation signal.
  
• Dashboard Signal Integration: The real-time dashboard combines oscillator status with directional signals for quick decision-making.
  
• Example: Dashboard showing "Oversold" status with "BUY" signal when HA candles turn bullish provides clear entry timing.
  

🔶 SETTINGS

Customization Options:

• Calculation: Oscillator period (default 14), smoothing factor (1-50, default 2)
  
• Levels: Overbought threshold (50-100, default 70), oversold threshold (0-50, default 30)
  
• Moving Averages: Toggle display, fast EMA length (default 9), slow EMA length (default 21)
  
• Visual Enhancements: Show/hide signal dashboard, customizable table position
  
• Alert Conditions: Oversold bounce, overbought reversal, bullish/bearish MA crossovers
  
• The Heikin-Ashi Mean Reversion Oscillator provides traders with a sophisticated momentum tool that combines the smoothing benefits of Heikin-Ashi analysis with mean reversion principles. The double transformation process creates cleaner signals while the integrated dashboard and multiple confirmation methods help traders identify high-probability entry and exit points during both trending and ranging market conditions.