ChannelMomentumBreakerV5

9 окт. 2022 г.

This indicator is based on an original idea which is derived from Dow Theory: "Asset prices incorporate all available information". The driving influence behind this indicator is to consider only Meaningful changes in behaviour in a time independent system.

The way it works is simple and as follows:
The indicator decides on a singular price point called the Pivot Price which will be used as a baseline/calibration point
It then generates its own OHLC candles based on a 1-1 mapping from the real time candles to the "virtual" candles
The ratio between the top tails and bottom tails of these virtual candles will determine if there is a meaningful change in behaviour
The result is reflected in the histogram for conveniency.

The indicator can be considered as time-frame agnostic but works most optimally when derived from smaller time-frames (e.g. its detection of meaningful changes will be better when used in a 1-minute candle time-frame as opposed to a 3-minute time-frame).

Colour scheme:
------------------

The virtual candles follow a two-colour convention:
Gray - Considered a safe zone for entry
Red - Considered less safe

These virtual candles must be analysed in conjunction with the histogram.

Histogram colour scheme:
Red - Signifies less than mid-level change in behaviour
Yellow - Signifies change in behaviour that is not strong enough or too late with respect to when the "up" trend began
Gray - Signifies no meaningful change in behaviour has occurred for a long time
Lime - Signifies meaningful change in behaviour has occurred recently
White - Signifies a meaningful change in behaviour has occurred recently and quickly
Blue - Signifies risky change in behaviour
Teal - Signifies a virtual bar open is greater than the previous virtual bar
In general, the upper half of the histogram is considered as a preferred zone for long entry and vice versa for the bottom half.

Crossover background colour scheme:
Red - Transition from positive behaviour -> negative behaviour (This is triggered when consecutive bars are crossing a certain low threshold )
Green - Transition from negative behaviour -> positive behaviour (This is triggered when consecutive bars are crossing a certain high threshold )

Input parameters:
Fast Acceleration Length and Slow Acceleration Length are used to control the sensitivity of the crossover mechanism on the histogram.

How to use:
The picture depicts the virtual (gray/red) candles and histogram.
The Blue rectangle shows the virtual bars and a full transition from negative behaviour to positive behaviour.
The Red rectangle shows when meaningful negative behaviour is occurring, where it may be suitable to begin preparing for an upwards trend (reversal of behaviour).
The Green rectangle shows when meaningful positive behaviour has occurred, and you can get ready to enter a trade.
A confirmed green bar in histogram is a sign that meaningful positive behaviour has occurred and the trade can be taken above the high confirmed bar.
In the below snapshot - The Green cross hair shows the recommended entry point for a long trade.


Snapshot:


Input Parameters
Fast MA Length - Fast threshold for crossing Meaningful changes in behaviour
Slow MA Length - Slow threshold for crossing Meaningful changes in behaviour
Display Imaginary bars - Toggle On/Off for displaying virtual candles
Regression Length - Histogram sensitivity (The Shorter value the more sensitive for changes )
Virtual Bars Smoothing Length - Length threshold for virtual bars smoothing (Increasing/Decreasing the value will impact when we consider Meaningful changes in behaviour)

Limitations:
In some cases when stock is not making a Meaningful change in behaviour for long time both the virtual bars and the histogram will be flat.
In such cases, consider changing to a higher time frame or changing the sensitivity settings.