1. Introduction

This indicator is based on the "Key Point" theory described by Jesse Livermore in his classic book, How to Trade in Stocks. The core objective is to identify Natural Retracements, Natural Recoveries, and Trend Breakouts to capture major market trends and pivotal turning points. This script is designed for traders seeking mid-to-long-term trend direction and key support/resistance zones.

2. Core Logic

The indicator defines different market states based on price movement percentages:

• Trend Confirmation: A trend shift is confirmed when the price breaks through previous key resistance or support levels and maintains a specific percentage of gain or loss.

• Market Phases: The market is categorized into six distinct states: Uptrend, Downtrend, Natural Retracement, Natural Recovery, Secondary Recovery, and Secondary Retracement.

• Key Point Recording: It automatically records and marks the highs and lows of each wave. These levels serve as critical psychological levels and technical references for future price action.

3. Parameter Definitions

Core Algorithm

• Adjustment Percentage: Defines the threshold for a "Natural" move. When the price retraces or recovers beyond this percentage, the indicator records a new pivot point.

• Reversal Percentage: A filter used to confirm trend resumption or the breakout of a key point, preventing false signals caused by minor volatility.

• N * Adjustment Percentage...: A multiplier (default is 10) used to detect a total trend reversal in cases where the market moves sharply without a prior consolidation phase.

Display Settings

• Display Livermore lines and zones: Toggles the visibility of Livermore resistance/support lines and their corresponding colored rectangular zones.

• Show Trend flag: Displays real-time labels on the chart indicating the current market phase (e.g., "Uptrend", "Natural Retracement").

• Show Trend resume: Toggles the visibility of trend resumption arrows (↑/↓).

• Show wave / Pivot Labels: Draws ZigZag-style wave lines and marks High (H) / Low (L) labels.

Color Coding

The indicator provides customizable colors for different market behaviors:

• Trend Colors: Defines the primary direction (Uptrend/Downtrend).

• Natural Colors: Represent healthy corrections within a trend.

• Secondary Colors: Represent weaker counter-trend bounces or pullbacks.

4. How to Use

1. Monitor Zones: The colored rectangles automatically drawn by the indicator represent significant support and resistance areas.

2. Trend Labels: By following the labels above/below the bars, users can clearly identify which phase of the Livermore cycle the market is currently in.

3. Breakout Signals: When the price effectively moves above the up_point (Resistance) or below the down_point (Support), it often signals the start or continuation of a major trend.

Disclaimer: This indicator is for technical analysis purposes only and does not constitute investment advice. It is recommended to adjust the "Adjustment Percentage" based on the volatility of the specific asset and timeframe being traded.