Professional Trend Line 123 

1. Indicator Overview

Professional Trend Line 123 is a Pine Script v5 indicator developed based on the trend line drawing logic from Victor Sperandeo's classic book Principles of Professional Speculation. It is designed to overlay on price charts, automatically identify market swing highs and lows, and draw accurate, consistent trend lines. The indicator helps traders objectively judge trend direction and potential trend reversals, avoiding biases caused by manual trend line drawing.

2. Core Parameter Explanation

Swing High Strength: Defines the criteria for valid swing highs; a higher value means stricter screening to confirm a high as a periodic peak and filter out false highs caused by short-term fluctuations.

Swing Low Strength: Defines the criteria for valid swing lows; a higher value means stricter screening to confirm a low as a periodic trough and filter out false lows caused by short-term oscillations.

Breakout Confirmation Bars: Verifies the validity of trend line breakouts; a breakout is confirmed only when the price stays beyond the trend line for more than the set number of bars, avoiding false breakouts that interfere with trading decisions.

Keep Historical Trend Lines: Controls whether historical trend lines are displayed on the chart; selecting "Yes" allows viewing the evolution of past trends for pattern review, while selecting "No" displays only current valid trend lines for a cleaner chart.

Down Trend Line Color: Sets the display color of downtrend lines; traders can adjust it according to personal viewing habits to enhance downtrend visibility.

Up Trend Line Color: Sets the display color of uptrend lines; traders can adjust it according to personal viewing habits to enhance uptrend visibility.

Trend Line Valid Range: Based on the professional trading principles in Principles of Professional Speculation, it limits the valid lookback bar range for trend line drawing to ensure trend lines fit recent market movements and avoid signal lag caused by overly long analysis cycles.

3. Core Indicator Principles

Based on the core trend line drawing logic from Principles of Professional Speculation, the indicator automatically identifies valid periodic peaks and troughs that meet the swing high and low strength requirements.

Uptrend line: Starts from a valid swing low, draws a line upward to the right connecting subsequent valid swing lows, ensures no price levels are crossed between the two lows, and extends to the recent peak.

Downtrend line: Starts from a valid swing high, draws a line downward to the right connecting subsequent valid swing highs, ensures no price levels are crossed between the two highs, and extends to the recent trough.

It validates trend line breakout validity through the Breakout Confirmation Bars parameter, limits the analysis period through the Trend Line Valid Range parameter, and ultimately achieves objective, consistent trend tracking to provide reliable technical references for trading decisions.

4. Usage Scenarios

Trend Judgment: Quickly determine the current mainstream market trend direction through the uptrend or downtrend lines displayed on the chart.

Trading Signal Reference: Watch for bullish trend reversals when the price validly breaks below an uptrend line; monitor bearish trend reversals for long opportunities when the price validly breaks above a downtrend line.

Risk Management: Use trend lines as stop loss or take profit reference levels; hold positions if the trend does not experience a valid breakout.

Review and Analysis: Enable the Keep Historical Trend Lines function to review past trend reversal patterns and optimize trading strategies.