Three Bar Reversal Pattern and Indicator for ThinkorSwim

[BenTen]

The three bar reversal pattern is a significant signal in technical analysis, often used by traders to identify potential trend reversals. It typically consists of three consecutive bars on a price chart, indicating a shift from a prevailing trend to a new direction. This pattern is characterized by the first bar representing the current trend, followed by a second bar indicating a potential reversal, and finally confirmed by the third bar, which typically closes beyond the high or low of the first bar, signaling a reversal. Traders often use this pattern to make informed decisions about entering or exiting positions in the market.

The setup looks for a few consecutive red candlesticks and the final bar being a green candle closing higher than previous bars.

Here is an example:

Below is the code to identify bullish trigger bar in the Three Bar Reversal pattern. It also comes with an alert system.

thinkScript Code

# Three-Bar Reversal Indicator
# Found in the thinkScript Archive
# Alert added by WalkingBallista
# https://usethinkscript.com/d/187-three-bar-reversal-pattern-and-indicator-for-thinkorswim

def TBRup = close > open[1] and close[1] < close[2]  and close[2] < close[3] and close[3] < close[4];
plot bullish = if TBRup then high else Double.NaN;
bullish.SetPaintingStrategy(PaintingStrategy.BOOLEAN_ARROW_UP);
alert(bullish,"TBR Up", alert.Bar,sound.ding);

Shareable Link

https://tos.mx/pLfTyM

If you would like to look for bearish trigger bar in this pattern, you can insert the following code into that indicator.

def TBRdown = close < open[1] and close[1] > close[2] and close[2] > close[3] and close[3] > close[4];
plot bearish = if TBRdown then low else Double.NaN;
bearish.SetPaintingStrategy(PaintingStrategy.BOOLEAN_ARROW_DOWN);
alert(bearish,"TBR Down", alert.Bar, sound.ding);

The script was posted on the thinkScript Lounge Archive. It did not mention who created the indicator.

 

[mohitdas]

@BenTen I would like to add a label to top left corner side of the chart, how should i write the AddLabel command for above charts to show if currently in TBRUP or TBRDown status.Thank You

 

[BenTen]

@mohitdas Take a look at this reference page: https://tlc.thinkorswim.com/center/reference/thinkScript/Functions/Look---Feel/AddLabel

 

[lukeskywalker]

This indicator indicates the place of three bar reversal with arrows on the chart. The formation is quite specific. Not many people know about it.

⚙Let's place the indicator according to the "three bar reversal" pattern. We'll choose a 5-minute timeframe for that. Import indicator by using <Edit Studies> menu. It will appear on the list. You need to enter Studies – User Defined. Click on the necessary indicator and add - "Add Study".
________________

#thinkscript indicator: Three_Bar_Reversal.
#Shows the pattern "Three Bar Reversal"
#by thetrader.top

def bSignalDown = open[2]<close[2] and low[1]>low[2] and low[1]<high[2] and high[1]>high[2] and high<high[1] and close[1]<low[1];
def bSignalUp = open[2]>close[2] and low[1]<low[2] and low[2]<high[1] and low[1]<low[2] and low>low[1] and low<high[1] and close>high[1];
plot down = if bSignalDown then high else double.NaN;
plot up = if bSignalUp then high else double.NaN;
up.SetPaintingStrategy(paintingStrategy.BOOLEAN_ARROW_up);
down.SetPaintingStrategy(paintingStrategy.BOOLEAN_ARROW_down);
up.setDefaultColor(color.LIGHT_green);
down.setDefaultColor(color.LIGHT_red);

 

[LynnChen]

Hi Ben, The three bars reversal indicator is excellent! but can you change the last green candle must higher then the previous candle's wick not the close. Thank you so much!

 

[RushPro808]

BenTen is big pimpin! Appreciate all the hard work you put into this. I will be referencing this site and yourself on anything I use or modify. Cheers!

 

[BenTen]

@LynnChen So the last green candle closing higher than the high of the previous candle?

 

[LynnChen]

Yes BenTen the last green candle should close one penny higher than the high of the previous candle. I have been using the TBR conjunction with other indicator from this Forums, they work so well and less emotion to trade. Thank you so much!

 

[BenTen]

@LynnChen Try this:

# Generation time: 2020-08-05T22:36:03.729Z

def IsUp = close > open;
def IsDown = close < open;
def IsDoji = IsDoji();
def avgRange = 0.05 * Average(high - low, 20);
plot PatternPlot =
    IsDown[3] and
    IsDown[2] and
    IsDown[1] and
    IsUp[0] and
    high[1] < close[0];

PatternPlot.SetPaintingStrategy(PaintingStrategy.BOOLEAN_ARROW_UP);
PatternPlot.SetDefaultColor(GetColor(0));

 

[LynnChen]

Thank you so much BenTen!

 

[RushPro808]

@BenTen I am about to donate... you have a link to send me?

 

[BenTen]

@RushPro808 We don't have a donation link. But if you want to support us, you can grab a VIP membership

 

[RushPro808]

@RushPro808 We don't have a donation link. But if you want to support us, you can grab a VIP membership

Done.

 

[cay7man]

@BenTen I like this simple indicator! How are IsDoji and avgRange used? I don't see any references to them.

 

[BenTen]

@cay7man They were included by default when generating the candlestick pattern in ThinkorSwim.

 

[Acepian]

thanks for information. I will search for more information.

 

[DudeDastic]

@BenTen Love the idea of this indicator. But testing reveals it doesn't work on every legit reversal (like when there's a gap between the first and the second bar, and when the second bar is bigger than the first(get it right sometimes)).

The code above, which ensures that the third bar in the reversal closes higher than the high of the previous red bar, seems to not make use of the IsDoji and avgRange variables. What do they do?

Also, how would you write the bearish version of this? I tried the following but I don't think it works correctly:

plot bearish =  IsUp[3] and IsUp[2] and IsUp[1] and

IsDown[0] and low[1] > close[0];

 

[BenTen]

@DudeDastic You can actually use the built-in ThinkorSwim candlestick pattern builder to create your own version.

Click on Patterns > Select patterns > Candlestick >Create...

 

[DudeDastic]

@BenTen Hm, didn't know that. Thanks!

 

[spencepuppy]

Can someone create a morning star indicator? Similar to the blastoff indicator but it highlights only morning star dojis. This is one of the strongest candlestick patterns out there, think it could be a huge use for folks. Thanks for everything in this community!