Free TradingView Script: The Magnitude of Price Discovery

This TradingView script is a simple attempt to show the magnitude of price discovery [where price is going].

Before we discuss how it works we need to discuss our terms.

Universal Truth of Price #1 – Price only trades in 3 distinct ways

• Scenario 1 – Inside bar to previous range, consolidation
• Scenario 2 – Trending bar up or down, HH + HL to previous bar or LL + LH to previous bar
• Scenario 3 – Outside bar, Higher highs AND lower lows to previous bar. Also known as a broadening formation.

If you are interested in the 2nd universal truth, my indicator “Timeframe Continuity Bars” discusses it here

Given one of the 3 scenarios price can trade in is a broadening formation [scenario 3], it proves that price discovery occurs as a series of new highs and new lows.

Notice the scenario 3 marked by SimpleStratNumbers at https://www.tradingview.com/script/99HjpTrX-Simple-Strat-Numbers/

This scenario 3 is a broadening formation on the 1min and on the 30min basis.

Given this is true we know if price rejects the broadening highs it is attempting to make new lows to the broadening range.

So, what this indicator does is it uses previous swing highs and swing lows and it shows you when price reclaims them and gives you a target.

The target of this indicator is guaranteed to be hit if the 2nd universal truth of price is in your favor.

This means if we reclaim a previous high to the downside. At the time of all known participation groups selling [last price below the 60 D W M opens] we know the magnitude of this selling would be the other side of the range [dotted line].

So it’s simple, the solid line shows you the reclaimed level. The dotted line shows you the magnitude.

Full timeframe continuity tells you when it is FOR SURE going to your target price via MTF analysis of the aggressiveness of the buyers/sellers.

However timeframe continuity is subject to change every 60min, every day, every week, and every month! That’s the risk you take when trading.

Here’s one example for you.

AAPL monthly made a new low and changed to green this was your evidence price is attempting to take the other side of the range.

AAPL monthly opened green again and re-confirmed the upside which meant the other side of the range was still for certain going to be taken out. After being taken out, breakout traders buy the highs and any shorts in AAPL are forced to cover.

BOOM!

This indicator is likely to be updated in the near future to align entries on multiple timeframes. Nothing spoken here is financial advice and it is ONLY what we know to be true about price action.