Percentile Line

Description:

A percentile line is a tool used to assess the relative position of a data point within a specified historical dataset. Typically applied in financial markets, this indicator represents the percentile rank of a current value compared to past observations within the same timeframe. For instance, a 90th percentile line signifies the level at which the current value exceeds 90% of historical values, while a 10th percentile line marks the point below which the current value is lower than 90% of past observations. By analyzing these percentile lines, traders and analysts can identify potential extremes, such as overbought or oversold conditions, and anticipate market reversals based on historical price action.

Input Parameters:

Length: Number of periods used in the calculation.
Percentile: A statistical measure that represents a specific point in a data set below which a certain percentage of observations fall.
Price Source: The specific data points (such as open, high, low, or close) from each candle in a financial chart that an indicator uses for mathematical computations, enabling the calculation of metrics like the average over a specified period.
Offset: The offset value is used to access the data of any candle or indicator concerning the current candle. For example, to access the current candle data it will use the offset value of "0", to access previous candle data "-1" offset value will be used, and access data of previous to previous "-2" will be used.

Use Case:

Identifying Overbought and Oversold Conditions: Percentile lines indicate extreme price levels, helping traders spot overbought (above 90th percentile) or oversold (below 10th percentile) conditions, potentially signaling upcoming price corrections.
Detecting Reversal Points: Extreme percentiles (e.g., 90th or 10th) can indicate potential trend reversals. Persistent failure to surpass upper percentiles may signal weakening buying pressure, while failure to breach lower percentiles may indicate waning selling pressure.
Setting Trading Strategies: Traders can establish buy or sell signals based on percentile thresholds. For instance, entering long positions when prices exceed the 75th percentile and exiting when they drop below the 50th, or entering short positions below the 25th percentile and exiting above the 50th, providing systematic trading rules grounded in historical price behavior.

This feature can be used in: