The indicator compares the size of bars so that if there is a noticeable increase in (noticeable here meaning above the indicator threshold) it marks the bar high and low prior to the bigger candle.
In true TradingView spirit, the author of this script has published it open-source, so traders can understand and verify it. Cheers to the author! You may use it for free, but reuse of this code in a publication is governed by House Rules. You can favorite it to use it on a chart.