Formation Defined Moving Support and Resistance

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The script was originally coded in 2018 with Pine Script version 3, and it was in protected code status. It has been updated and optimised for Pine Script v5 and made completely open source.

The Formation Defined Moving Support and Resistance indicator is a sophisticated tool for identifying dynamic support and resistance levels based on specific price formations and level interactions. This indicator goes beyond traditional static support and resistance by updating levels based on predefined formation patterns and market behaviour, providing traders with a more responsive view of potential support and resistance zones.

Features:
The indicator detects essential price levels:

1. Lower Low (LL)
   
2. Higher Low (HL)
   
3. Higher High (HH)
   
4. Lower High (LH)
   
5. Equal Lower Low (ELL)
   
6. Equal Higher Low (EHL)
   
7. Equal Higher High (EHH)
   
8. Equal Lower High (ELH)
   

By identifying these key points, the script builds a foundation for tracking and responding to changes in price structure.

Pre-defined Formations and Comparisons:

1. The indicator calculates and recognises nine different pre-defined formations, such as bullish and bearish formations, based on the sequence of price levels.
   
2. These formations are compared against previous levels and formations, allowing for a sophisticated understanding of recent market movements and momentum shifts.
   
3. This formation-based approach provides insights into whether the price is likely to maintain, break, or reverse key levels.
   

Dynamic Support and Resistance Levels:

1. The indicator offers an option to toggle Moving Support and Resistance Levels.
   
2. When enabled, the support and resistance levels dynamically adjust:
   
3. Upon a change in the detected formation.
   
4. When the bar’s closing price breaks the last defined support or resistance level.
   
5. This feature ensures that the support and resistance levels adapt quickly to market changes, giving a more accurate and responsive perspective.
   

Customisable Price Source:

1. Users can choose the price source for level detection, selecting between close or high/low prices.
   
2. This flexibility allows the indicator to adapt to different trading styles, whether the focus is on closing prices for more conservative levels or on highs and lows for more sensitive level tracking.
   

This indicator can benefit traders relying on dynamic support and resistance rather than fixed, historical levels. It adapts to recent price actions and market formations, making it useful for identifying entry and exit points, trend continuation or reversal, and setting trailing stops based on updated support and resistance levels.