What is reversal_threshold_pct and how does it detect trend exhaustion?

  • Home
  • Documentation
  • What is reversal_threshold_pct and how does it detect trend exhaustion?

The reversal_threshold_pct is a critical Volatility Gate parameter that identifies early signs of trend exhaustion. It allows the bot to detect when the market has stopped moving against your trade and is beginning to reverse, enabling safer DCA execution.

🔹 1️⃣ Purpose of Reversal Threshold

  • While explosive_threshold_pct holds orders during high-momentum moves, and neutral_threshold_pct detects a pause in momentum, the reversal threshold detects an actual trend shift.
  • It tells the bot:

"Momentum is no longer just neutral — price is now moving back in favor of the trade."

  • This allows DCA orders to fire at a better entry point, closer to the recovery low/high rather than during a still-ongoing crash or pump.

🔹 2️⃣ How Reversal Threshold Works

  1. The Volatility Gate calculates smoothed adverse movement from recent 1-minute candles:
smoothed_movement = ((second_half_avg - first_half_avg) / first_half_avg) × 100

  1. Determines adverse movement relative to trade direction:

  2. Long trades: adverse = -smoothed_movement

  3. Short trades: adverse = +smoothed_movement

  4. Compares adverse movement against reversal_threshold_pct:

  5. Long trade example: reversal_threshold_pct = -0.3%

    • Adverse movement ≤ -0.3% → price has started recovering toward the long position

  6. Short trade example: reversal_threshold_pct = -0.3%

    • Adverse movement ≤ -0.3% → price has started recovering toward the short position

  7. If the required neutral/reversal streak is met (required_neutral_streak), the DCA order is released.

🔹 3️⃣ Example Scenario

  • DCA order held due to explosive momentum (-5% smoothed movement)
  • Neutral threshold: 0.5% (not yet reached)
  • Reversal threshold: -0.3%

Price movement over 2 polls:

Poll Smoothed Adverse Movement Status
1 -0.1% Below neutral threshold → counts as 1 neutral/reversal reading
2 -0.35% Below reversal threshold → trend reversal detected

Result:

  • DCA order is released at a safer price, after confirming trend exhaustion rather than just a pause.

🔹 4️⃣ Key Principles

  1. Detects early trend exhaustion: Price moving back toward the trade
  2. Releases DCA orders strategically: Instead of firing during the worst part of the move
  3. Works with neutral threshold and streak: Ensures reliability — avoids false releases on brief spikes
  4. Smoothed, not instantaneous: Uses candle averages to prevent noise from triggering a false reversal

🔹 5️⃣ Recommended Values

Trading Style Suggested Reversal Threshold Notes
Maximum safety -0.2% to -0.3% Only releases after a confirmed recovery trend
Balanced -0.3% to -0.5% Default for most symbols
Aggressive -0.5% to -1% Releases earlier, more risk but faster DCA execution

Smaller absolute value → stricter, safer — waits for more meaningful reversal Larger absolute value → more aggressive — may release earlier in a volatile recovery

🔹 6️⃣ Monitoring in Logs

Log Message Meaning
👁️ DCA Observer: still volatile Adverse movement above neutral/reversal threshold — holding continues
✅ DCA Observer: RELEASING Adverse movement ≤ reversal_threshold_pct and streak met — DCA fires into early recovery
🚀 DCA Release [cooled] DCA executed after trend exhaustion confirmed

🔹 7️⃣ Summary

reversal_threshold_pct is a trend exhaustion detector:

  • Identifies when momentum has flipped back toward your position
  • Works with smoothed kline movement and neutral streak to release DCA safely
  • Ensures orders enter closer to market lows/highs rather than during ongoing crashes or pumps

Combined with explosive_threshold_pct and neutral_threshold_pct, it forms a professional-grade three-layer safety system, giving the bot institutional-level DCA protection.

📎 Related Topics