Reward Ratio Validator

12 ago

This PineScript code creates an indicator called "Reward Ratio Validator" that helps traders evaluate potential trade setups based on pivot points, standard deviation, and risk/reward ratios. Here's a breakdown of what the code does:

1. Input parameters:
- Pivot: Number of bars for pivot calculation
- STDEV Length: Number of bars for standard deviation calculation
- Risk / Reward: The desired risk-to-reward ratio
- STDEV Multiplier: Multiplier for the standard deviation
- On : Short | Off : Long: A toggle to switch between short and long trade analysis

2. Pivot point calculation:
- The code calculates pivot highs and lows using the specified pivot length
- It stores the last pivot high and low in an array

3. Standard deviation calculation:
- Calculates the standard deviation of closing prices over the specified length

4. Risk/Reward deviation calculation:
- For long trades (when show is false):
Calculates the price level where the reward would be 'rvr' times the risk, based on the last pivot low
- For short trades (when show is true):
Calculates the price level where the reward would be 'rvr' times the risk, based on the last pivot high

5. Plotting:
- Plots the calculated risk/reward levels for both long and short trades
- Plots the multiplied standard deviation

6. Visual representation:
- Fills the area between the risk/reward levels and the standard deviation plot
- Uses color coding to indicate whether the current price movement exceeds the standard deviation threshold:
- Green: The move is within the standard deviation threshold
- Red: The move exceeds the standard deviation threshold

This indicator helps traders visually assess whether a potential trade setup offers the desired risk/reward ratio while considering the recent price volatility (represented by the standard deviation). It can be used to identify possible entry points for both long and short trades that meet specific risk/reward criteria.