Power Bar SMA Directional (Trade Your Edge)

GENERAL OVERVIEW:
The Power Bar SMA Directional (Trade Your Edge) indicator identifies high-momentum Power Bars and uses a structured SMA-based breakout model to generate Long and Short trading signals. Once a signal appears, the indicator automatically places a Stop-Loss and three Take-Profit levels, with an optional dynamic trailing stop-loss. Alerts are available for every trade event.

This indicator was developed by Flux Charts in collaboration with Steven Adams (Trade Your Edge).

What is the purpose of the indicator?:
The purpose of the Power Bar SMA Indicator is to turn an unusually strong candle (Power Bar) into a complete, rule-based trade setup. The indicator does three main things, very specifically:

1. It spots “power bars”. These are candles where the body is both large compared to the candle’s own range and large compared to nearby candles.
   
2. It only cares about power bars when they align with the trend’s direction: bullish or bearish.
   
3. When that happens, the indicator gives a buy or sell signal with an entry at the signal candle, a stop-loss at the low/high of the power bar, and three take-profit targets placed at fixed multiples of the entry to stop-loss distance. You can also have the stop move up/down after each target is hit with the trailing stop-loss feature.
   

What’s the theory behind the indicator?:
The theory behind this indicator is that large, one-sided candles often mark the start of directional strength. When a candle’s body takes up most of its total range and exceeds the average size of recent candlesticks, it shows clear control from either buyers or sellers. The indicator combines this concept with a simple moving average to confirm trend direction, ensuring signals only align with the current bias. It then checks if price breaks a recent swing high or low to confirm momentum is continuing rather than consolidating inside a range. By combining three core elements: trend bias, momentum identification, and confirmation that price has room for new discovery beyond prior ranges, the indicator can focus on finding trade setups that have multiple market factors in alignment.

POWER BAR SMA DIRECTIONAL FEATURES:
The Power Bar SMA Directional indicator includes 4 main features:

1. Power Bars
   
2. Trend Bias
   
3. Long / Short Signals + Risk Management
   
4. Alerts
   

POWER BARS:
🔹What are Power Bars?:
Power Bars are large, high-momentum candles that show strength in one direction of the market. They form when a candle’s body (the distance between open and close) dominates most of the candle’s total range (the distance between high and low), meaning price moved strongly in one direction with little to no pullback. To qualify, the candle must also be large relative to nearby candles. This size difference confirms that the candle is a burst of momentum.

🔹How to interpret and use Power Bars:
When a Power Bar forms, it signals that price has just made a strong directional move with little to no pullback. Traders can use these bars to identify momentum shifts and potential trade setups.

A bullish Power Bar means buyers controlled the entire candle, marking the start of upward momentum. A bearish Power Bar means sellers were in control of the entire candle, signaling the start of downwards momentum. In the Power Bar SMA Directional indicator, these candles are only used for signals when they align with the market trend and satisfy other entry requirements, mentioned later on.

• Bullish Power Bars forming above the Simple Moving Average (SMA) can signal potential long opportunities.
  
• Bullish Power Bars forming below the SMA can signal potential short opportunities.
  

🔹How are Power Bars identified:
Power Bars are detected and confirmed only after the candle closes, ensuring that the full candlestick body and range can be measured. The indicator does not repaint or change past bars. Once a Power Bar is confirmed, it stays fixed on the chart. Power Bars can be detected on any timeframe or symbol that produces standard candlestick data.

The indicator identifies Power Bars using two user-defined inputs: Sensitivity and Body %.

◇ Sensitivity:
The Sensitivity setting determines how large a candle’s body must be relative to nearby candles. It uses the Average True Range (ATR) to compare the current candle’s size with recent candles, and the Sensitivity value acts as a multiplier of that ATR. A higher Sensitivity value means the candle must be much larger than recent candles to qualify, so fewer Power Bars will form. A lower value makes the filter less strict, allowing more candles to qualify.

◇ Body %:
The Body % setting controls what percentage of the candle’s total range must be body rather than Wick. A higher value requires the body to take up more of the candle’s total range, so fewer candles pass the filter. A lower value allows candles with more wick to qualify, so more Power Bars will form.

Body % Example:
If Body % is set to 50, the candle body must cover at least half of the candle’s total range. For example, if a candle’s high is $11, its low is $10, its open is $10.20, and its close is $10.80, then the total range is $1 ($11 - $10) and the body is $0.60 ($10.80 - $10.20). Body % = (Body / Total Range) * 100 = (0.60 ÷ 1.00 × 100) = 60%. Since 60% is greater than the input of 50%, this candle passes the Body % criteria.


Once a candlestick closes and it meets both the Sensitivity and Body % requirements, it will be plotted in a different color, using barcolor() function. Users can adjust the bullish/bearish colors of Power Bars by adjusting the ‘Candle Coloring’ setting. The Power Bar candle coloring is purely visual and does not affect signal logic or strategy calculations.


TREND BIAS:
The indicator uses a Simple Moving Average (SMA) to determine overall trend direction and ensure that long/short signals align with the market bias.

When the SMA is sloping upward and price is trading above it, the market is considered to be in a bullish trend. In this case, only long setups are allowed. When the SMA is sloping downward and price is below it, the market is considered bearish, and only short setups are valid. This filtering ensures that every signal follows the current trend rather than fighting it.

Within the settings, the SMA length can be customized to match different trading styles. A shorter SMA period reacts more quickly to price changes, making it better suited for scalping or lower timeframes where traders want faster entries and exits. A longer SMA period responds more slowly, which smooths out smaller fluctuations and is more useful for day traders or swing traders who focus on larger trends. By default, the SMA length is set to 20.

Signals on NNQ 5-minute timeframe with a 10 SMA vs. 100 SMA:



🔹Why does the indicator include a trend filter?:
This indicator is built around the assumption that markets tend to continue moving in their current direction. Thus, if the trend is bullish, it’s assumed that price will continue moving higher. If the trend is bearish, it’s assumed that price will continue moving lower. By combining the SMA filter with the momentum logic of the power bars, the indicator avoids countertrend setups. This keeps signals focused on continuation setups where both the trend and short-term strength (momentum) are in agreement.

LONG/SHORT SIGNALS:
This indicator identifies potential trade setups by combining momentum, trend alignment, and structural confirmation. It detects when a Power Bar candle appears, and then looks for confirmation that the move is valid through trend alignment and a structure break.

There are three long setups and three short setups:

1. Momentum Breakout
   
2. Proximity Breakout
   
3. Delayed Breakout
   

All setups require:

• A valid Power Bar forming in the correct context relative to the SMA.
  
• A break of nearby structure (defined by the Swing Length setting).
  

🔹Signal Settings:
◇ SMA Distance:
This setting defines how close a Power Bar must be to the SMA to qualify for the proximity breakout setup type. It measures the maximum allowed distance between the Power Bar’s open price and the SMA, expressed as a multiple of the Average True Range (ATR).

This setting only affects Setup #2 (Proximity Breakout) and sometimes Setup #3 (Delayed Breakout). Setup #1 does not use this filter because its logic depends on price crossing the SMA or confirming later. In proximity setups, the power bar candle must both open and close on the same side of the SMA (bullish or bearish) while still being within the allowed SMA Distance range. This condition prevents signals when price is stretched too far away from the SMA, which could indicate exhaustion or a potential pullback rather than continuation.

A lower SMA Distance value tightens this filter, allowing only Power Bars that form very close to the SMA, resulting in fewer but more conservative signals. A higher SMA Distance value gives wiggle room and allows setups that form farther from the SMA, generating more frequent signals.

In the example below, when the SMA Distance is set to 0.5 (left chart), the bullish Power Bar does not trigger a long signal because its opening price is too far from the SMA. When the SMA Distance is increased to 1.0 (right chart), the same candle now falls within the allowed range, making the setup valid and displaying a long signal label.


◇ Swing Length:
The Swing Length setting defines how the indicator identifies recent structure levels used for breakout confirmation. These structure levels are swing highs and swing lows, which represent points where price reversed direction over a specified number of bars. The indicator uses these high/low levels to determine whether price has broken past a meaningful area of prior support or resistance before confirming a trade setup.

The Swing Length value determines how far back the indicator looks when calculating these points. Internally, it uses the Highest/Lowest method, scanning the last N bars (where N is the Swing Length input) to find the highest high and lowest low within that range.

• The highest high becomes the immediate resistance level for potential long setups.
  
• The lowest low becomes the immediate support level for potential short setups.
  

A lower Swing Length value makes the indicator reference closer levels. This increases the number of potential signals because nearby highs and lows are easier for price to reach.

A higher Swing Length value references farther structure levels, typically major swing points, which reduces signal frequency.

Every setup requires a structure break for confirmation. The Swing Length setting directly affects how strict or lenient the entire indicator behaves for each setup type.

In Setup #1 (Baseline Momentum Breakout) and Setup #2 (Trend-Aligned Proximity Breakout), the Power Bar must break the structure level during or immediately after its formation.

In Setup #3 (Delayed Breakout Confirmation), the same Swing Length level is referenced for a limited number of candles defined by the Candles Between Confirmation setting.

◇ Candles Between Confirmation:
The Candles Between Confirmation setting defines how long the indicator will wait for price to confirm a breakout after a qualifying Power Bar forms. It represents the maximum number of bars allowed between the Power Bar’s close and the moment when price breaks the nearby structure level, which is derived from the Swing Length setting. The structure level is defined as the most recent swing high (for long setups) or swing low (for short setups).

If a structure break occurs within the specified window, a valid signal is triggered, and the Long or Short label is plotted at the close of the breakout candle. If price fails to break through the level within a certain number of candles, the setup is invalidated. This ensures that signals only appear when momentum follows through promptly, and not when price stalls or consolidates for an extended period.

Lower values make confirmations stricter, capturing only quick momentum breakouts. Higher values allow more time for slower markets or higher timeframes to complete structure breaks. Adjust this setting based on market volatility and trading style.

In the example below, when Candles Between Confirmation is set to 10, no signal appears because price breaks the swing high after 15 bars, which is greater than the allowed limit. When the setting is increased to 15, the same move qualifies, and a long signal is triggered as price breaks the swing high 15 candles after the initial bullish Power Bar that crossed the SMA.


🔹Long Setups:
Long Setup #1: Momentum Breakout

1. A bullish Power Bar opens below the SMA, and closes above it, showing buyer strength.
   
2. A breakout must occur during this bullish Power Bar candle through a nearby resistance level derived from the Swing Length setting.
   
3. When this breakout occurs, a Long Signal appears at bar close.
   

After a signal appears, three take-profit levels and one stop-loss level are also plotted.

• Stop-Loss: Placed at the Power Bar’s low.
  
• Take-Profit 1: Set using a 1:1 risk distance from the Stop-Loss to entry.
  
• Take-Profit 2: Extends to 1:1.5 risk-to-reward.
  
• Take-Profit 3: Extends to 1:2 risk-to-reward.
  

(Power Bars are white in this image)


Long Setup #2: Proximity Breakout

1. A bullish Power Bar opens and closes above the SMA, but is still close enough to it to show price hasn’t extended too far. (Refer to SMA Distance setting). As long as the opening of that candle is within the SMA Distance threshold, the setup remains valid.
   
2. The bullish Power Bar candle must break through the recent swing high (refer to Swing Length setting).
   
3. A Long Signal triggers when that breakout is confirmed.
   

After a signal appears, three take-profit levels and one stop-loss level are also plotted, similar to Long Setup #1.

(Power Bars are white in this image)


Long Setup #3: Delayed Breakout

1. A bullish Power Bar appears in a valid location (Refer to Long Setup #1 or Long Setup #2), but structure is not broken immediately.
   
2. The indicator waits for confirmation within the maximum Candles Between Confirmation window. If price breaks structure within that time, a Long Signal appears. If price fails to break structure in time, the setup is discarded.
   

Risk Management:
Same Stop-Loss, TP 1, TP 2, and TP 3 logic as Long Setup #1

(Power Bars are white in this image)


🔹Short Setups:
Short Setup #1: Momentum Breakout

1. A bearish Power Bar opens above the SMA, and closes below it, showing seller strength.
   
2. A breakout must occur during this bearish Power Bar candle through a nearby support level derived from the Swing Length setting.
   
3. When this breakout occurs, a Short Signal appears at bar close.
   

After a signal appears, three take-profit levels and one stop-loss level are also plotted.

• Stop-Loss: Placed at the Power Bar’s high.
  
• Take-Profit 1: Set using a 1:1 risk distance from the Stop-Loss to entry.
  
• Take-Profit 2: Extends to 1:1.5 risk-to-reward.
  
• Take-Profit 3: Extends to 1:2 risk-to-reward.
  

(Power Bars are white in this image)


Short Setup #2: Proximity Breakout

1. A bearish Power Bar opens and closes below the SMA, but is still close enough to it to show price hasn’t extended too far. (Refer to SMA Distance setting). As long as the opening of that candle is within the SMA Distance threshold, the setup remains valid.
   
2. The bearish Power Bar candle must break through the recent swing low (refer to Swing Length setting).
   
3. A Short Signal triggers when that breakout is confirmed.
   

After a signal appears, three take-profit levels and one stop-loss level are also plotted, similar to Short Setup #1.

(Power Bars are white in this image)


Short Setup #3: Delayed Breakout

1. A bearish Power Bar appears in a valid location (Refer to Short Setup #1 or Short Setup #2), but structure is not broken immediately.
   
2. The indicator waits for confirmation within the maximum Candles Between Confirmation window. If price breaks structure within that time, a Short Signal appears. If price fails to break structure in time, the setup is discarded.
   

Risk Management:
Same Stop-Loss, TP 1, TP 2, and TP 3 logic as Long Setup #1

(Power Bars are white in this image)


🔹Trailing Stop-Loss Feature:
When the Trailing Stop-Loss setting is enabled, the Stop-Loss (SL) automatically adjusts as price reaches take-profit levels. This feature helps secure profits while keeping the trade logic completely rule-based and non-discretionary.

Here’s exactly how it works step-by-step:

Initial Stop-Loss placement:

• For a Long trade, the initial SL is set at the low of the bullish Power Bar that triggered the setup.
  
• For a Short trade, the initial SL is set at the high of the bearish Power Bar that triggered the setup.
  

This level stays fixed until one of the Take-Profit targets is reached.

After TP 1 is hit:

• The SL automatically moves to the entry price (breakeven).
  

After TP2 is hit:

• The SL automatically moves to TP 1
  

Final exit condition:

• The trade is considered complete once either the trailing Stop-Loss or TP 3 is reached.
  

🔹Visualization:
Users can enable or disable:

• Long Signals
  
• Short Signals
  
• Take-Profit Lines
  
• Take-Profit Labels
  
• Stop-Loss Lines
  
• Stop-Loss Labels
  
• Signal Line
  
• SMA
  

◇ Signal Line:
The Signal Line is an optional visual feature that helps users see exactly which structure level the indicator is using to confirm a breakout. It does not change how signals are generated. It only displays the reference point on the chart.

Users can customize the Signal Line style (Dashed, Dotted, Solid) and choose different colors for bullish and bearish signal lines. The Signal Line can also be turned off completely. When disabled, signals will not be affected.


ALERTS:
The indicator supports alerts, so you never miss a key market move. You can choose to receive alerts for each of the following conditions:

• Long Signal
  
• Short Signal
  
• TP 1 (Take-Profit 1)
  
• TP 2 (Take-Profit 2)
  
• TP 3 (Take-Profit 3)
  
• SL (Stop-Loss)
  

UNIQUENESS:
This indicator automates a strategy that is normally managed manually using multiple steps: identifying large momentum candles, validating trend direction, confirming breakout strength through structure, and then projecting clean risk-based targets. The SMA Distance filter, confirmation window, and swing structure rules work together to ensure signals only trigger when momentum (Power Bars) aligns with technical levels. This indicator turns Power Bars into complete trade ideas with real-time SL/TP management and alerts.