The consolidation (congestion) is a price change in a relatively narrow range for a long time.
As a rule, the breakouts of this area are characterized by a prolonged trend or increased volatility.
The consolidation zone itself is a sign of a strong support/resistance level. Among the examples that use the consolidation in this regard are the Sniper (Author - Pavel Dmitriev) and Second-time through described by Joe Ross. In addition to the above, there are many other systems that utilize the consolidation. Their detailed descriptions are publicly available. In some it makes up only a small part, others are fully based on it.
Since the indicator is primarily oriented on breakouts, the current incomplete bar is not taken into consideration.
- Drawing mode (see the screenshot):
- Markers - as soon as the consolidation is found, the indicator places markers that correspond to the consolidation areas. The markers are placed only at the last bar. If the height is refined on the following bar, the markers will indicate the changed height. The previous value will not change.
- Rectangles - draws a rectangle from the beginning to the end of the consolidation area. This process uses the latest, refined value, which may cause it to "redraw".
- Min. C-zone size, bars - the minimum size of the consolidation area (duration/time of the consolidation)
- BackStep, bars - the previous period for comparison, as the consolidation is a relative value.
- Sensitivity - detection sensitivity. The higher the value, the more accurate the detection. (>1)
- Use trend filter - enable/disable trend filter. It is recommended to enable it.
- Trend filter sensitivity - sensitivity of the trend filter. The higher the value, the less sensitive the filter. (>0)
- Show C-Zones types (see the screenshot) This indicator features identification of the consolidation areas based on the parameters of candles (open-close) and wicks ("tails") of candles (high-low). Available options: open-close AND high-low, open-close OR high-low, open-close, high-low
- Extend C-Zone (only for current Symbol) - as the detection of the consolidation areas uses a certain period, it is possible that a consolidation area will be "broken" yet, but it will not be identifiable according to the input parameters. This parameter allows to continue the area forward until its actual breakthrough (see the screenshot).
- Open-Close color, High-Low color, Open-Close style, High-Low style, Open-Close width, High-Low width, Marker type (options: Dots, Rhombus, Arrows) - consolidation display style.
- Check all MarketWatch - in this mode, the indicator checks all symbols displayed in the MarketWatch using the current settings and the current timeframe. Also, a button will appear to allow opening charts where the consolidation was detected (see the screenshot).
- Alert, E-Mail, Push - additional notification.
- Limit, bars - the depth of history, where the indicator works. 0 - all history.
How to customize the indicator according to your trading style?
I do it like this: on a "clean" chart, I manually draw rectangles, which I would consider to be the consolidation and where I would be able to successfully use the signals. After that, I overlay the indicator in the "Rectangles" mode and change the input parameters, until the indicator results match the manually draws consolidations as much as possible.
The default parameters are quite operational (see the screenshot), but they may require adjustments according to the peculiarities of a certain currency pair or different timeframes.