Markov Candle Prediction For ThinkOrSwim

[antwerks]

What pattern(settings) should be used for Mega stocks? Thank you

Human pattern recognition is powerful but also highly prone to false positives. In markets, this is often called "apophenia" — seeing meaningful signals in noise. Institutions know this risk and instead rely on statistically testable patterns with repeatable edge.
Here are the go-to patterns and models institutional and quant traders favor, ranked by statistical robustness:
Statistically Reliable Patterns Used by Institutions

1. Mean Reversion Around VWAP / Moving Averages

• Used by: Market makers, HFTs, intraday funds
• Tools: VWAP, standard deviation bands (like Bollinger), regression channels
• Why: VWAP reflects where large volume has traded — price reversion to VWAP often happens due to institutional anchoring.
• Statistical Model: Ornstein-Uhlenbeck processes (stochastic mean-reverting)
• (e.g., RSI, Bollinger Bands, Stochastics)

2. Breakouts from Consolidation Zones

• Used by: Trend followers, volatility traders
• Statistical basis:
  • Low volatility regimes often precede high volatility
  • Tested using ATR squeeze, Keltner vs. Bollinger bandwidth
• Quant Confirmation: Price > range high + increased volume + volatility expansion
• Popular Tools: Donchian channels, Keltner, ADX, ATR ramps
• Bollinger Band Width, ADX- Volume Spike, TTM Squeeze- Momentum, RSI, VWAP - Supply and demand zones, Price closes outside range

3. Momentum with Confirmation

• Used by: Quant equity, macro funds
• Core principle: Assets that perform well continue to outperform (short-term or medium-term)
• Quant version:
  • RSI > 70 + slope positive
  • Price > 20d MA & 50d MA, rising
• Key Add-on: Volume confirmation or price persistence

Signal Type	Momentum Indicator	Confirmation Pair
Trend + Momentum	MACD	ADX > 20
Breakout Momentum	RSI > 60	Volume Spike + OBV↑
Acceleration Check	ROC	Bollinger Band Width↑
Pullback Entry	Stoch RSI Cross↑	Price > 21 EMA

4. Divergence in Price vs. Momentum

• Used by: Discretionary institutional traders, macro traders
• Statistical type: Leading indicator of exhaustion
• Best used with:
  • RSI or ROC vs price
  • Volume divergence (OBV flat/down while price rises)
• Caveat: Best in combination with range-bound or mean-reverting conditions
• Recommended Setup for Divergence Detection
  Combine 1 or 2 momentum indicators with simple price structure tools:
  • RSI + MACD Histogram
  • ROC + Trendlines
  • AO + Price Swings
  • Stoch RSI + Support/Resistance

5. Order Flow Imbalances

• Used by: High-frequency trading, execution algos
• Concept: Institutional traders watch limit order book flow → imbalance leads price
• Data Required: Level 2, DOM
• Quant Proxy: Tick imbalance, delta (buy vs. sell pressure), CVD (cumulative volume delta)
• Volume Profile indicator, Delta Volume/Bid-Ask Deltas, Cumulative Delta, VWAP & Standard Deviations and Market Structure with Volume Surge

6. Volatility Expansion / Compression

• Used by: Options desks, gamma scalpers
• Quant tool:
  • IV Rank/Percentile
  • HV vs. IV comparison
  • Bollinger Band width
• Why it works: Options are priced on expected volatility. When reality diverges from pricing, opportunity arises.

Bonus: Repeated Institutional “Footprint” Patterns
These aren’t shapes like “cup and handle” — they are conditions that often signal institutional behavior:

Pattern Condition	Implication
Price flat, volume rising	Accumulation or distribution
Sharp drop, no volume	Lack of conviction / likely bounce
High OI + gamma at strike	Option dealer positioning
Multiple failed breakouts	Liquidity hunt / stop runs

So what should you look for?
If you want to think like an institution, prioritize conditions, not shapes.

Instead of:​

• “I think this is a head and shoulders”, Think:
  • “Price is failing to make higher highs while RSI is fading and volume is declining — that’s a statistically testable reversal setup.”

 

[tellyt]

i don't know what to make of this. how would you change the settings for an ETF like TQQQ, for instance, and a daily time preference instead of 5m and the like?

This is a Probability pattern matching system. The best way to use it it to keep that defaults and then move down to a timeframe that has at least 30 matches. So for TQQQ it looks like you can use the 15 min or lower. This indicator is better for trying to trade stocks or index that have ZeroDTE options . On a 15 min chart you should get a high pattern match and then make a short term option play . Without a high number of matches this is a useless indicator!