Indicator Overview

This indicator provides an advanced implementation of the classic island reversal concept, adapted for the price behaviour found in modern FX, index, crypto, and commodity markets. Instead of relying on basic gap detection, it measures displacement, consolidation tightness, and breakout strength using objective rules and ATR-based thresholds. Each potential island is analysed against trend direction, average volume profiles, R² horizontality conditions, and volatility compression to ensure that only the most meaningful reversal structures are displayed. 

Background & History

Island reversals originated from classical technical analysis, where gaps isolated a group of candles from previous price action. These patterns often marked supply-and-demand imbalances or incorrect market positioning that corrected abruptly. In electronic markets, genuine gaps are less frequent, but the underlying behaviour remains relevant. Modern island structures are better detected by analysing displacement, consolidation, and breakout logic rather than gap-based rules. Traders have adapted the concept to identify sudden exhaustion events in which the price temporarily stabilises before reversing strongly. The Island Reversal Pro Indicator builds on this evolution with rules that reflect how order flow behaves in contemporary markets. The design focuses on volatility-adjusted thresholds and objective pattern recognition, so traders can capture the same reversal logic without relying on outdated gap-based definitions.

How the Indicator Works

The indicator continuously scans the market for a strong directional leg followed by a compact consolidation zone that becomes isolated from surrounding price action. It measures the strength of the incoming and outgoing legs using ATR calculations and confirms whether the consolidation is tight enough to qualify as an island. The tool then applies optional filters, including trend-direction checks, comparisons of island volume with previous activity, horizontality evaluation using R² analysis, and validation of volatility compression against ATR thresholds. Once all conditions are satisfied, the indicator marks the structure with a shaded rectangle and adds a clear label indicating whether it represents a top or bottom reversal. Alerts trigger when a new pattern completes on the most recent closed candle.

Key Features

• Automated detection of bullish and bearish island reversal structures.

• Customisable filters for trend, volume, volatility, and consolidation quality.

• Shaded zones and clear labels for visual interpretation.

• Real-time pop-up and Telegram alerts when new patterns complete.

• Adjustable ATR thresholds for sensitivity and precision.

• Designed for all timeframes and trading styles.

Telegram Alerts

When a signal occurs, the indicator will send a Telegram alert directly to your PC or mobile device.

• How to Configure Telegram

How to Use it for Trading

Traders use this indicator by first watching for a completed island zone with a clear label, either a bottom island reversal for bullish setups or a top island reversal for bearish setups. When a bullish island forms after a strong downward move, the pattern suggests sellers are exhausted and buyers are taking control. A bearish island appearing after a strong upward move suggests profit-taking and potential distribution.

Entries are usually considered after the breakout candle has closed beyond the island zone, with stops placed just outside the opposite edge of the island to contain risk. Position size should be adjusted based on account rules and ATR-based volatility. The signal becomes more robust when aligned with a higher timeframe trend or confirmed by momentum or volume tools. Beginners should focus on one or two instruments, use default settings, and practise on a demo or a small size before scaling up.

Quick steps.

• Wait for a completed island zone with a clear label.

• Confirm that the price has broken out and closed beyond the zone.

• Align with higher timeframe trend or momentum where possible.

• Place stops beyond the island, high or low, and size the position sensibly.

• Use alerts, review trades, and adjust parameters only after enough samples.

Complimentary Indicators

Using this tool alongside a small set of confirmation indicators creates a stronger, more reliable trading framework. Island reversals work best when supported by trend structure, volatility awareness, and momentum validation. Combining these tools helps filter weak setups and improve timing on both entries and exits. A trend-based indicator confirms whether the market environment supports a reversal, a volatility indicator assists with stop placement and risk calibration, and a momentum or strength tool highlights whether participation is building in the new direction. These combinations provide a disciplined approach that reduces noise and increases the probability of capturing meaningful moves.

Recommended complementary indicators.

• Higher Timeframe Trend Dashboard for multi-timeframe confirmation.

• Moving Average Ribbon for trend alignment and flow detection.

• ATR Levels for volatility-based stop placement and risk control.

• RSI Momentum for strength validation and breakout confirmation.

Inputs & Parameters

The indicator offers a wide set of configurable parameters that allow traders to fine-tune sensitivity, filtering behaviour, and alert preferences. The table below describes each available input, grouped for clarity.

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