Candle Count

Description:

The Candle Count indicator is a counting system that inspired by concepts that Tom DeMark introduced it in his book, “The New Science of Technical Analysis" (1994). It is important to note that the Candle Count indicator is similar, but not identical to, the methods described in DeMark's book. It is a simple market timing tool designed to identify potential turning points in price trends by highlighting periods of market exhaustion. It consists of a Signal phase (counting nine consecutive candles that close higher or lower than four candles earlier) and a Count phase (tracking 13 candles that close lower or higher than the two previous candles). The value proposition of Candle Count lies in spotting trend exhaustion and potential reversals, making it useful for identifying buy or sell opportunities before the broader market reacts. It signals when a trend is likely to pause or reverse, allowing traders to anticipate market shifts.

In the Candle Count indicator, the Buy Signal and Buy Count are distinct phases that work together to identify potential trend exhaustion and reversal points:

Buy Signal: This is the initial phase that identifies a potential buying opportunity by counting nine consecutive candles that close lower than the close four periods earlier. This sequence suggests the market is in a downtrend and may be approaching exhaustion. The Buy Signal does not necessarily indicate an immediate reversal but sets the stage for one by highlighting the trend's weakness.
Buy Count: Following the Buy Signal, the Buy Count seeks to confirm the trend exhaustion by counting 13 additional candles where each candle closes lower than the close two periods earlier. This phase is slower and more deliberate, focusing on the final stages of a trend. Once completed, it suggests a stronger and more imminent buy signal, indicating the downtrend is likely exhausted and a reversal is more probable.

The key difference is that the Buy Signal identifies a potential exhaustion phase, while the Buy Count confirms it with further price deterioration, leading to a higher confidence level in the potential reversal.

In the Candle Count indicator, the Sell Signal and Sell Count phases work together to identify potential trend exhaustion and reversal points for selling:

Sell Signal: This is the initial phase that identifies a potential selling opportunity by counting nine consecutive candles that close higher than the close four periods earlier. This sequence suggests the market is in an uptrend and may be nearing exhaustion. The Sell Signal signals that the uptrend might be weakening but does not guarantee an immediate reversal.
Sell Count: Following the Sell Signal, the Sell Count aims to confirm the trend exhaustion by counting 13 additional candles where each candle closes higher than the close two periods earlier. This phase is more deliberate, focusing on the final stages of an uptrend. Once completed, it suggests a stronger and more imminent sell signal, indicating that the uptrend is likely exhausted and a reversal is more probable.

The key difference is that the Sell Signal signals the potential start of trend exhaustion, while the Sell Count confirms it, providing a higher confidence level in a forthcoming market reversal to the downside.

Input Parameters:

'Completed': When this setting is turned on, the indicator will only show labels or signals for Signals and Counts that have been fully completed (i.e., all 9 counts for Signals and all 13 counts for Counts). This helps traders focus only on confirmed exhaustion points without being distracted by ongoing, incomplete sequences that may not yet indicate a strong reversal signal.
'Repeat Labels': When this setting is turned on, the indicator will display the labels or Signals repeatedly each time a Signal or Count is completed, even if they occur consecutively. This feature is useful for highlighting multiple instances of exhaustion signals within an ongoing trend, emphasizing recurring opportunities to consider buying or selling based on trend exhaustion.

Use Case:

Applicable Across Timeframes: The Candle Count can be used on any financial-traded asset and on multiple timeframes, making it a versatile tool for traders.
Trend Reversals: The Candle Count allows traders to enter or exit positions ahead of significant market moves by identifying potential exhaustion points.
Clear, Quantifiable Signals: The numerical values generated by the Candle Count provide easily interpretable signals, reducing the subjectivity often associated with technical analysis.

This feature can be used in: