Market Type Classifier

MARKET TYPE CLASSIFIER

Overview
The Market Type Classifier analyzes overnight session behavior to predict daily market character. It classifies each trading day as either TRENDING (bullish or bearish) or CONTRADICTING based on how price interacts with established overnight ranges during specific time windows.

Core Methodology
Time-Based Session Analysis:
The indicator divides the overnight period into fixed and variable phases for both Asia and London sessions.

Asia Session:
Fixed Phase (18:00-19:30 EST): Establishes the initial range high and low - visualized with a customizable gray box
Variable Phase (19:30-02:30 EST): Tests the fixed range to determine direction and validity

London Session:
Fixed Phase (02:30-03:30 EST): Establishes the initial range high and low - visualized with a customizable gray box
Variable Phase (03:30-07:30 EST): Tests the fixed range to determine direction and validity

Direction Logic:
The FIRST break during the variable phase determines the session direction:

Long: First break is above the fixed range high
Short: First break is below the fixed range low

Validity Logic:
Session validity depends on whether price breaks one or both sides:

True Session: Breaks only one side of the fixed range (directional conviction)
False Session: Breaks both sides of the fixed range (lack of conviction)

Visual Components
Fixed Range Boxes:
Light gray shaded boxes mark the high-to-low ranges established during the fixed periods. These boxes help you visualize:

The exact price levels being tested during variable sessions
Where the critical breakout/breakdown levels are located
The size of the overnight consolidation ranges

Box color is fully customizable in settings and can be toggled on/off.
Classification Table:
A compact table displays:

Asia/London Direction (Long/Short) with color coding
Asia/London Session validity (True/False) with color coding
Final Market Type classification
Trading guidance based on classification

Market Type Classification
The indicator combines Asia and London session characteristics into 16 possible combinations, classified as:
Bullish TRENDING (4 combinations) - Green:

Long True + Long True
Long True + Short False
Short False + Short False
Short False + Long True




Bearish TRENDING (4 combinations) - Red:

Short True + Short True
Short True + Long False
Long False + Long False
Long False + Short True




CONTRADICTING (8 combinations) - Orange:
All remaining combinations indicate conflicting overnight behavior




Interpretation & Usage
TRENDING Markets (Green = Bullish, Red = Bearish):
When both overnight sessions show aligned conviction, the daily high/low is often created during overnight hours. The fixed range boxes will show you where these key levels formed. Expect continuation or reversion strategies to work best.
CONTRADICTING Markets (Orange):
When overnight sessions show conflicting signals, expect the daily high/low to be created during Regular Trading Hours (RTH). Opening Range (OR) breakouts and intraday range expansion strategies tend to perform better.

Color Coding System
Direction & Session Rows:
Green text: Bullish combinations (Long True or Short False)
Red text: Bearish combinations (Short True or Long False)
Gray text: N/A or incomplete sessions

Market Type:
Green "TRENDING": Bullish trending day
Red "TRENDING": Bearish trending day
Orange "CONTRADICTING": Contradicting market conditions

Settings & Customization
Table Display:

Position: 9 placement options
Size: Tiny, Small, Normal, or Large

Fixed Range Boxes:
Toggle boxes on/off
Customize box background color and transparency
Boxes automatically appear only during fixed session periods

Unique Features
First-Break Direction: Unlike typical range breakout indicators, this uses the FIRST break to establish directional bias, not the final direction
Dual Session Analysis: Combines both Asia and London sessions for comprehensive overnight market characterization
Validity Framework: The True/False session concept quantifies overnight conviction levels
Visual Range Display: Fixed range boxes show exactly what levels the indicator is monitoring
Daily Reset: Automatically resets at 18:00 EST for the new trading day

Best Practices
Instrument: Designed for NQ (NASDAQ 100 E-mini futures)
Timeframe: Works best on 15-minute charts or lower
Timing: Check the classification before RTH open (09:30 EST)
Integration: Use as a market filter with your existing trading methodology
Strategy: TRENDING days favor overnight high/low holding; CONTRADICTING days favor intraday breakouts

Development Note
This indicator is the result of extensive backtesting on 15+ years of NQ data. The specific time windows and classification combinations have been optimized through historical analysis revealing that markets split nearly 50/50 between Trending (48.92%) and Contradicting (51.08%) conditions, with distinct performance characteristics for each market type.