This tool helps you to read trend strength and spot divergences, to be ready for a reversal.
All the tool is based on a colorcode:
- bright colors = impulse bars.
- hard colors = consolidation / continuation bars.
- light colors = weakness bars.
=> You can choose to use barcolor, or not, and simply use the indicator. Divergences occured on the histogram, when the price makes a local high/low, but the histogram in the black zone.
Also, the reason why i created is that it is insanely accurate to spot divergences in an established trend.
#In an uptrend:
- If prices makes a higher high,
- But bar color is green light (or histogram is in the blackzone), it's probably the end of the move and a regular divergence is happening.
=> Take profit and open a short.
#In a downtrend :
- If price makes a lower low,
- But bar color is red light (or histogram is in the blackzone), it's probably the end of the move and a regular is happening.
=> Take profit and open a long.
To sum up:
- when you see light bars, or if the histogram is in the blackzone, be prepared for a move.
- To choose the direction, check for divergences before entering.
To get the most benefit of this indicator, use it in a strategy :
The indicator will give you the best results in the subordinate timeframe, considering you trade using a macro trend, a parent and a subordinate one.