Overview

The Rounding Bottom Pattern indicator is an institutional-grade pattern recognition tool designed to detect one of the most powerful bullish reversal formations in technical analysis. Also known as a “saucer bottom,” the rounding bottom pattern signals a gradual shift from selling pressure to buying interest, often preceding significant upward moves.

Unlike simple moving average crossovers, this indicator uses a multi-layered confirmation system involving SMA and EMA alignment, recovery percentage validation, and volume spike filtering. It is built for traders who want to catch major trend reversals early, with the confidence that multiple technical conditions have been met before a signal fires.

This is a premium indicator, available exclusively to Volensy members with an active Gold or Platinum subscription.

How It Works

The indicator continuously scans price action for the characteristic U-shaped formation that defines a rounding bottom. Rather than relying on a single trigger, it layers five distinct confirmation filters to ensure high-quality signals.

Pattern Detection Logic

  1. Rounding bottom shape — The indicator identifies a gradual decline followed by a flattening and then a gradual rise, forming the classic curved bottom shape over a configurable lookback period.
  2. SMA(40) trend confirmation — The 40-period Simple Moving Average is used to validate the broader trend context. Signals are stronger when the SMA(40) is flattening or beginning to turn upward, confirming that the longer-term downtrend is losing momentum.
  3. EMA(20/50) alignment — The indicator checks that the 20-period EMA is crossing above or approaching the 50-period EMA. This dual-EMA alignment confirms that short-term momentum is overtaking medium-term momentum, a hallmark of genuine reversals.
  4. Recovery percentage validation — The price must have recovered a minimum percentage from the pattern’s lowest point. This filter eliminates shallow, insignificant bottoms and ensures the formation has meaningful depth.
  5. Volume spike filtering (120%+ average) — The breakout candle must show volume at least 120% of the recent average volume. Institutional buying typically drives volume spikes at the breakout point, and this filter confirms that real capital is flowing into the move.

Signal Generation

When all five conditions align simultaneously, a LONG signal fires. The entry price is recorded, and the multi-stage TP/SL system activates:

  • TP1 — 0.5% from entry
  • TP2 — 1.0% from entry
  • TP3 — 1.5% from entry
  • Stop Loss — 2.0% from entry
Note: This indicator is primarily a bullish reversal detector. It generates LONG signals. SHORT signals may be generated when the pattern logic detects bearish conditions, but the rounding bottom’s strength lies in catching upside reversals.

Key Features

  • Institutional-grade pattern recognition — Detects the classic rounding bottom formation using algorithmic shape analysis, not just simple indicator crossovers.
  • Five-layer confirmation — SMA(40), EMA(20/50) alignment, recovery percentage, volume spike, and pattern shape must all confirm before a signal fires.
  • Volume spike filtering — Requires 120%+ of average volume on the breakout candle, ensuring institutional participation.
  • Real-time info panel — Displays entry price, current PnL, success rate, trade duration, and signal status.
  • Multi-level TP/SL — Three take profit targets and a fixed stop loss on every signal.
  • Bar coloring — Candlesticks reflect the active signal direction for instant visual clarity.
  • Configurable alert system — Set alerts for pattern detection, LONG entries, TP hits, and SL triggers.

Configuration / Settings

| Parameter | Default | Description |
|———–|———|————-|
| Lookback Period | 50 | The number of candles the indicator scans to identify the rounding bottom shape. Larger values detect wider formations. |
| SMA Length | 40 | Period for the Simple Moving Average used in trend confirmation. |
| Fast EMA | 20 | Period for the fast Exponential Moving Average in the alignment check. |
| Slow EMA | 50 | Period for the slow Exponential Moving Average. |
| Min Recovery % | 2.0% | Minimum price recovery from the pattern low required before a signal can fire. |
| Volume Spike Threshold | 120% | Minimum volume as a percentage of the average volume required on the breakout candle. |
| TP1 Level | 0.5% | First take profit target. |
| TP2 Level | 1.0% | Second take profit target. |
| TP3 Level | 1.5% | Third take profit target. |
| Stop Loss | 2.0% | Maximum loss threshold. |
| Show Info Panel | On | Toggle the floating stats panel. |
| Show Bar Colors | On | Toggle candlestick coloring. |

Warning: Decreasing the Lookback Period below 30 may cause the indicator to detect shallow or incomplete patterns. Keep this value at 40 or above for best results.

Trading Signals

LONG Signal

A green LONG label appears when the rounding bottom pattern completes with all confirmations met. This means:

  • A valid U-shaped bottom has formed over the lookback period.
  • SMA(40) is flattening or turning upward.
  • EMA(20) has crossed above or is converging with EMA(50).
  • Price has recovered the minimum percentage from the pattern low.
  • The breakout candle has volume at least 120% above average.

This is a high-conviction bullish entry. The multi-layer filtering means signals are less frequent but carry significantly higher quality.

Signal Resolution

The signal remains active until a TP level is hit, the SL triggers, or a new opposing signal fires. The info panel tracks cumulative results across all completed trades.

Best Practices

Recommended Markets

  • Crypto — BTC/USDT, ETH/USDT, and mid-cap altcoins. Rounding bottoms form frequently on crypto assets during accumulation phases following selloffs.
  • Stocks — Individual equities, especially after earnings dips or sector rotations. Large-cap stocks tend to form cleaner rounding bottoms than small caps.
  • Forex — Less common on major pairs due to their ranging nature, but effective on crosses like GBP/JPY or AUD/NZD where directional trends develop.

Recommended Timeframes

  • 1-hour — Best balance of signal quality and frequency for active traders.
  • 4-hour — Higher conviction signals with stronger institutional participation.
  • Daily — The classic timeframe for rounding bottom patterns. Signals are rare but highly reliable.
Note: Rounding bottoms are inherently longer-forming patterns. On timeframes below 30 minutes, the pattern may not have enough structure to form reliably. Stick to 1H and above for this indicator.

Tips

  1. Wait for the volume confirmation — The volume spike on the breakout candle is the most important confirmation. A pattern that completes without elevated volume is far more likely to fail.
  2. Check the broader trend — Rounding bottoms are most powerful when they form at the end of a sustained downtrend. If the market has only dipped slightly, the pattern may not carry the same reversal strength.
  3. Combine with support levels — If the pattern’s low aligns with a known support level (horizontal support, previous demand zone, or a key moving average), the signal is significantly stronger.
  4. Be patient — This indicator generates fewer signals than momentum-based tools. That is by design. Each signal represents a carefully filtered opportunity.

Related Documentation

*See also: Indicators Overview*
*See also: Understanding the TP/SL System*
*See also: Using the Info Panel*
*See also: Three White Soldiers* — Another pattern recognition indicator focused on bullish reversals.
*See also: Indicator Comparison Guide*

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