Event, State, Position: A Framework for Evaluating Power Candles

Video: TURN ANY SIGNAL INTO A 90% SETUP WITH THESE 3 THINGS
Creator: Oliver Velez Trading
Original Video: Watch the original video
Difficulty: Advanced

The Big Idea

The same large candle can mean different things depending on where it appears. The source organizes decisions around the event itself, the relationship between two moving averages, and price’s location relative to that state. The useful framework can be studied without treating the title’s ninety-percent claim as a verified probability.

Three Questions Before Treating a Candle as an Opportunity

The creator’s framework asks what event formed, what state surrounds it, and where the event sits relative to that state. His examples use two- and five-minute charts with 20- and 200-period simple moving averages. This supplies a hierarchy of context rather than a rule to trade every colorful candle.

The source repeatedly claims seventy-, eighty-, and ninety-percent follow-through or success rates. The supplied transcript does not include a defined outcome horizon, full sample, execution model, costs, or independent evaluation establishing those rates. A favorable screenshot cannot supply the missing denominator.

Follow-through and profitability are also different outcomes. A candle can move briefly in the intended direction and still produce a losing trade under a particular entry, stop, or exit. The framework is therefore a set of hypotheses to operationalize, not a probability label to attach to every signal.

Know the Event Before Adding Confluence

An elephant bar is described as relatively large compared with recent bars and largely made of body rather than wicks. The source refers to roughly ten recent candles for comparison. It does not give a single ratio threshold for all markets.

A tail bar has a small body and a very large relevant wick, with the source suggesting about eighty to eighty-five percent of the full range for a pure example. It generally waits for a later break of the tail candle’s extreme. The body color is less central to that event than the rejection wick.

A color change includes a strong opposite response, such as a green candle overcoming a preceding red candle. The source discusses both adjacent 180-style events and later removal of a relevant opposite-color boundary. These are not necessarily the same as one standard textbook engulfing definition.

A large candle does not establish which institutions traded, how much net money entered, or that participants acted together. The chart can define magnitude and shape without proving the source’s institutional-flow explanation. Keep that narrative separate from the event rule.

Narrow and Wide Are Relative Measurements

In a narrow state, the 20 and 200 are close. The source prefers a flat, narrow combination, especially when price is also compressed. It considers one flat average with another trending average a secondary case, and two trending averages together a less preferred narrow case.

In a wide state, price is far from the 20 and the 20 is far from the 200. The source then discusses countertrend events aimed back toward the averages. That is a different hypothesis from continuation out of compression. Wide separation can persist during a strong trend; it is not a clock forcing immediate reversion.

A forty-five-degree visual slope changes when a chart is zoomed or rescaled. For research, use a price change over a specified number of bars normalized by price or ATR. The code uses explicit ATR-based separation and three-bar change thresholds rather than screen angle.

Position Changes the Decision Even When the Event Matches

The source calls the area between the averages a trap zone, prefers continuation events just outside a narrow state, and treats much farther extension differently. Its position labels are qualitative. A coded definition needs to specify whether distance is measured from the event’s beginning, low/high, close, or proposed fill.

Our baseline uses a prior close between the averages, a completed strong candle breaking beyond them, and event-origin proximity to the state. It does not cap every signal close at a tiny distance from the averages, because a completed large candle may already have traveled. That delay itself belongs in the execution review.

This means the marker is not an anticipation entry near the forming candle’s origin. It is evidence at the completed close. A study must not combine that later certainty with an earlier intrabar price and call it a realistic fill.

What High Win Rate Does Not Establish

The source’s eight-bar heuristic is also a claim about its style, not a universal market average. Eight two-minute bars span sixteen minutes; eight five-minute bars span forty minutes. Bar count does not guarantee a holding time, a profit, or a fixed amount of movement.

A One-Bar Stop Is Not a Fixed Money Loss

The source often places protection beyond the event candle, then later notes that a very close state may justify protection beyond that area instead. Those are different invalidation rules. The second can create a larger price distance than the event candle alone.

Neither rule limits realized loss to a harmless amount. Event ranges vary, position size matters, and stops can execute beyond their intended price. A one-bar geometric reference is not a promise that every loss has the same dollars or R multiple.

Build One Transparent Baseline Instead of Encoding Every Claim

The indicator implements only completed elephant events near a narrow, flat MA state. It defines narrow as separation no greater than 0.5 prior ATR, flat as each average moving no more than 0.1 prior ATR over three bars, and an elephant as range at least 1.5 times the preceding ten-bar average with at least seventy-five percent body.

These numbers are ours. The source’s alternative states, tail entries, color-change entries, and wide-state reversals remain separate future comparisons. The code’s near-position condition concerns the event’s origin/range relative to the frozen prior state, not a guaranteed favorable entry after the candle closes.

Exit rules are not fully specified in the source. That prevents the examples from establishing a complete return model. The indicator displays references rather than inventing an exit rule and publishing a performance number.

Pine Script Indicator

//@version=6
// Guide: https://candlechasers.com/event-state-position-elephant-bars/
// Original educational indicator. No orders, fills or performance claims.
indicator("CC Narrow State Elephant Context", overlay=true)
gapATR = input.float(0.5, "Maximum MA separation / prior ATR", minval=0.01)
flatATR = input.float(0.1, "Maximum 3-bar MA change / prior ATR", minval=0.001)
positionATR = input.float(0.5, "Event origin proximity to MA state / ATR", minval=0.01)
power = input.float(1.5, "Event range / previous 10-bar average range", minval=0.1)
bodyShare = input.float(0.75, "Minimum event body / range", minval=0.1, maxval=1)
life = input.int(15, "Event reference display bars", minval=1)
m20 = ta.sma(close, 20)
m200 = ta.sma(close, 200)
a = ta.atr(14)
avgRange = ta.sma(high - low, 10)[1]
upper = math.max(m20[1], m200[1])
lower = math.min(m20[1], m200[1])
// State is evaluated BEFORE the event candle; no 45-degree screen-angle rule.
narrow = math.abs(m20[1] - m200[1]) <= gapATR * a[1]
flat20 = math.abs(m20[1] - m20[4]) <= flatATR * a[1]
flat200 = math.abs(m200[1] - m200[4]) <= flatATR * a[1]
inside = close[1] >= lower and close[1] <= upper
barRange = high - low
elephant = barRange > 0 and barRange >= avgRange * power and math.abs(close - open) / barRange >= bodyShare
bull = chart.is_standard and barstate.isconfirmed and narrow and flat20 and flat200 and inside and elephant and close > open and close > upper and low <= upper + positionATR * a[1] and open >= lower - positionATR * a[1]
bear = chart.is_standard and barstate.isconfirmed and narrow and flat20 and flat200 and inside and elephant and close < open and close < lower and high >= lower - positionATR * a[1] and open <= upper + positionATR * a[1]
var float eventLow = na
var float eventHigh = na
var float stateEdge = na
var int born = na
if bull or bear
    eventLow := low
    eventHigh := high
    stateEdge := bull ? lower : upper
    born := bar_index
show = not na(born) and bar_index - born <= life
plot(m20, "SMA 20", color=color.blue, linewidth=2)
plot(m200, "SMA 200", color=color.red, linewidth=2)
bgcolor(chart.is_standard and barstate.isconfirmed and narrow and flat20 and flat200 ? color.new(color.teal, 90) : na, title="Prior-bar narrow/flat state context")
plot(show ? eventLow : na, "Latest event low: reference only", color=color.new(color.green, 30), style=plot.style_linebr)
plot(show ? eventHigh : na, "Latest event high: reference only", color=color.new(color.red, 30), style=plot.style_linebr)
plot(show ? stateEdge : na, "Opposite frozen state edge: alternative risk reference", color=color.orange, style=plot.style_linebr)
plotshape(bull, "Completed bullish near-state elephant proxy", shape.triangleup, location.belowbar, color.aqua)
plotshape(bear, "Completed bearish near-state elephant proxy", shape.triangledown, location.abovebar, color.orange)
alertcondition(bull or bear, "Narrow-state event context", "CC: completed narrow/flat-state elephant proxy. No 90% probability or execution claim.")
var table status = table.new(position.top_right, 1, 2, bgcolor=color.new(color.black, 10))
if barstate.islast
    table.cell(status, 0, 0, na(m200[4]) ? "Load at least 204 chart bars" : "Original closed-bar state/event/position proxy", text_color=color.white, text_size=size.small)
    table.cell(status, 0, 1, narrow and flat20 and flat200 ? "Prior state qualifies; event + near position still required" : "MA context visible; waiting for narrow/flat state", text_color=color.white, text_size=size.small)

What This Indicator Shows

SMA 20 and SMA 200 remain visible after sufficient history. A background tint identifies the prior narrow/flat context; triangles mark completed bullish or bearish elephant observations that also meet position criteria. The latest event high, low, and opposite frozen state edge are shown for fifteen bars by default. New signals replace those display references. There are no orders, position state, or simulated outcomes.

What This Indicator Does Not Show

It does not validate a ninety-percent setup, infer institutional identity, reproduce intrabar anticipation, measure exact discretionary screen angles, or implement every event/state combination. The prior-close-inside condition is a simple compression proxy, not a full price-flatness test. Stop references are visual alternatives, not protective orders. All event thresholds and the display lifetime are original definitions; individual bars can qualify repeatedly without representing independent trades.

Setup and Validation

Paste the complete code into TradingView’s Pine Editor, save it, and add it to the chart. Use the chart type, timeframe, and context described above, then inspect the status panel and reference plots before expecting a marker. Use Once Per Bar Close for the supplied alert conditions and recreate alerts after changing code or settings. No alert submits an order.

Validation status: Statically reviewed for completed-bar timing, source-versus-proxy distinctions, future-data use, state behavior, reference replacement and expiry, and visible output. This code has not been compiled or chart-tested in TradingView here. No historical performance or live-execution results are claimed. Use replay to check the described behavior and report any compiler or runtime message exactly.

Practice: Label the Three Pillars Before the Outcome

For consecutive examples, record the event definition, prior MA separation, slope measure, price location, completion time, realistic fill, invalidation choice, and objective. Keep examples with no qualifying event and those that fail after a brief favorable move. Label anticipation entries separately and require intrabar evidence rather than inferring them from the final candle.

Research and Comparison Lab

These are original proposed experiments, not results established by the source. Change one main feature at a time, retain failures and missing opportunities, and reserve later observations for evaluation rather than repeatedly selecting rules from the same outcomes.

Does the state filter add information?

Compare the same completed elephant definition with and without the narrow/flat filter. Keep position, dates, costs, and independent management fixed. Record candidate count, available reward, and full outcomes rather than equating a short favorable excursion with a winning trade.

Does position change the opportunity?

Compare event-origin distances near and farther from the state using a predeclared ATR scale. Keep event and state definitions unchanged. Record actual fill distance and untriggered cases; do not use the completed close to justify an earlier origin price.

How much do the two stop references change results?

Compare event-based and state-based invalidation for matched entries under a fixed money-risk ceiling. Recalculate size for each. Measure execution-sensitive losses, cost burden, and expectancy; a wider stop is a different experiment, not the same risk with more room.

Check Your Understanding

Does the transcript establish the ninety-percent rate? No. Its definitions and complete evaluation sample are missing.

Is follow-through identical to profit? No. Entry, exits, adverse movement, and costs matter.

How long are eight five-minute bars? Forty minutes.

Can a historical final candle prove its shape ninety seconds after opening? No. Intrabar evidence is needed.

Does a one-bar stop imply fixed money risk? No. Range, size, and actual execution determine that.

Final Takeaway

Use event, state, and position as a way to structure a testable question, not as a calibrated probability score. The most useful next step is a complete sample with explicit event timing and risk references, preserving what the source leaves discretionary.

Risk Disclosure

This material is educational and is not personalized financial, investment, or trading advice. Trading can cause substantial losses. Source-reported results, hypothetical examples, and probability illustrations do not establish future performance. Calculations depend on their assumptions and omit costs unless stated. Commissions, spread, slippage, gaps, leverage, liquidity, borrowing, financing, and changing market conditions can materially affect outcomes. Indicators do not simulate broker execution or establish profitability. Short exposure can involve losses beyond the initial sale value. Evaluate any approach with appropriate data, realistic costs, and explicit risk limits before considering live use.

This is an independent educational companion and is not affiliated with, sponsored by, endorsed by, or authorized by the source creator, channel, or TradingView.