Candle Breakout Oscillator [LuxAlgo]

The Candle Breakout Oscillator tool allows traders to identify the strength and weakness of the three main market states: bullish, bearish, and choppy.

Know who controls the market at any given moment with an oscillator display with values ranging from 0 to 100 for the three main plots and upper and lower thresholds of 80 and 20 by default.

🔶 USAGE



The Candle Breakout Oscillator represents the three main market states, with values ranging from 0 to 100. By default, the upper and lower thresholds are set at 80 and 20, and when a value exceeds these thresholds, a colored area is displayed for the trader's convenience.

This tool is based on pure price action breakouts. In this context, we understand a breakout as a close above the last candle's high or low, which is representative of market strength. All other close positions in relation to the last candle's limits are considered weakness.

So, when the bullish plot (in green) is at the top of the oscillator (values above 80), it means that the bullish breakouts (close below the last candle low) are at their maximum value over the calculation window, indicating an uptrend. The same interpretation can be made for the bearish plot (in red), indicating a downtrend when high.

On the other hand, weakness is indicated when values are below the lower threshold (20), indicating that breakouts are at their minimum over the last 100 candles. Below are some examples of the possible main interpretations:



There are three main things to look for in this oscillator:

• Value reaches extreme
  
• Value leaves extreme
  
• Bullish/Bearish crossovers
  

As we can see on the chart, before the first crossover happens the bears come out of strength (top) and the bulls come out of weakness (bottom), then after the crossover the bulls reach strength (top) and the bears weakness (bottom), this process is repeated in reverse for the second crossover.



The other main feature of the oscillator is its ability to identify periods of sideways trends when the sideways values have upper readings above 80, and trending behavior when the sideways values have lower readings below 20. As we just saw in the case of bullish vs. bearish, sideways values signal a change in behavior when reaching or leaving the extremes of the oscillator.

🔶 DETAILS

🔹 Data Smoothing



The tool offers up to 10 different smoothing methods. In the chart above, we can see the raw data (smoothing: None) and the RMA, TEMA, or Hull moving averages.

🔹 Data Weighting



Users can add different weighting methods to the data. As we can see in the image above, users can choose between None, Volume, or Price (as in Price Delta for each breakout).

🔶 SETTINGS

• Window: Execution window, 100 candles by default
  

🔹 Data

• Smoothing Method: Choose between none or ten moving averages
  
• Smoothing Length: Length for the moving average
  
• Weighting Method: Choose between None, Volume, or Price
  

🔹 Thresholds

• Top: 80 by default
  
• Bottom: 20 by default