Welcome to the world of trading! Today, we're diving into a powerful MT5 indicator that helps you spot Crash market spike patterns through a unique 3-candle formation.
Understanding the Spike Pattern
The pattern consists of a Red-Green-Red candle formation, where the red candles represent strong spikes, and the green candle indicates a retracement in between.
Once this pattern is identified, the indicator draws a box around the high and low of these three candles.
It also places a horizontal entry line at the open price of the middle candle.
This entry line remains active until the price returns to that level, signaling a potential trade opportunity.
Once the entry price is reached, the entry line is replaced by a shorter fixed line that connects the pattern to the mitigation candle.
This nifty tool works on both historical and real-time candles.
It visually assists in identifying potential return-to-zone trading opportunities.
Input Parameters
| Input Name | Description |
|---|---|
| BoxColor | Color of the zone box (default: Red). |
| LineColor | Color of the entry line (default: Dodger Blue). |
| BoxWidth | Thickness of the zone box border. |
| LineWidth | Thickness of the entry line. |
| BoxStyle | Style of the box border (solid, dashed, etc.). |
| LineStyle | Style of the entry line (solid, dashed, etc.). |
Spotting the Bearish Spike Formation
Now, let's break down the specific bearish spike formation that this indicator detects:
Candle 1:
Bearish (Red candle).
Long wick.
The body must be greater than 70% of the total candle range (indicating a strong spike).
Candle 2 (Middle):
Bullish (Green candle).
Can be any size; just needs to be positive.
Candle 3:
Bearish again.
Same condition as Candle 1: body must be > 70% of the full range.
When this pattern is identified:
The indicator highlights a "supply zone" formed by aggressive selling.
A box is drawn around the high and low of the three candles.
An entry line is drawn at the open price of the middle (green) candle, anticipating price to return.
Core Strategy Concept
This indicator is rooted in the Smart Money Concept (SMC), particularly focusing on mitigation zones and supply/demand imbalances.
After a strong bearish impulse, price often retraces back to the origin of the move (the middle candle).
The indicator visually marks this area as a “mitigation zone”.
When price returns to this zone (entry line), it's considered "mitigated", and traders can look for re-entry or a market reaction.
After mitigation, the entry line is removed for a cleaner chart, and a shorter line is drawn to indicate mitigation.
Practical Application
Look for return-to-box trades.
This strategy can be effectively used for sell setups on Crash markets (or Boom with inversion).
It pairs excellently with other indicators (like EMA, OBV, or order block confirmations).
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