Retracement and Extension Ratios [theEccentricTrader]

11 Apr 2023

█  OVERVIEW


This indicator displays retracement and extension ratios above or below the relevant peaks and troughs.


█  CONCEPTS


Green and Red Candles

• A green candle is one that closes with a close price equal to or above the price it opened.
• A red candle is one that closes with a close price that is lower than the price it opened.

Swing Highs and Swing Lows

• A swing high is a green candle or series of consecutive green candles followed by a single red candle to complete the swing and form the peak.
• A swing low is a red candle or series of consecutive red candles followed by a single green candle to complete the swing and form the trough.

Peak and Trough Prices (Basic)

• The peak price of a complete swing high is the high price of either the red candle that completes the swing high or the high price of the preceding green candle, depending on which is higher.
• The trough price of a complete swing low is the low price of either the green candle that completes the swing low or the low price of the preceding red candle, depending on which is lower.

Historic Peaks and Troughs

The current, or most recent, peak and trough occurrences are referred to as occurrence zero. Previous peak and trough occurrences are referred to as historic and ordered numerically from right to left, with the most recent historic peak and trough occurrences being occurrence one.

Range

The range is simply the difference between the current peak and current trough prices, generally expressed in terms of points or pips.

Retracement and Extension Ratios

Retracement and extension ratios are calculated by dividing the current range by the preceding range and multiplying the answer by 100. Retracement ratios are those that are equal to or below 100% of the preceding range and extension ratios are those that are above 100% of the preceding range.


█  FEATURES


Inputs

• Label Color


█  HOW TO USE


This indicator is intended for research purposes, strategy development and strategy optimisation. I hope it will be useful in helping to gain a better understanding of the underlying dynamics at play on any given market and timeframe.


█  LIMITATIONS


All green and red candle calculations are based on differences between open and close prices, as such I have made no attempt to account for green candles that gap lower and close below the close price of the preceding candle, or red candles that gap higher and close above the close price of the preceding candle. This may cause some unexpected behaviour on some markets and timeframes. I can only recommend using 24-hour markets, if and where possible, as there are far fewer gaps and, generally, more data to work with.