The Channel Filter indicator is a technical indicator that gauges the amount of currently present in the market. The purpose of this indicator is to filter out with-trend signals during ranging/non-trending/consolidating conditions.
This indicator assists traders in capitalizing on the assumption that trends are more likely to start during periods of high compared to periods of low . This is because high indicates that there are bigger players currently in the market, which is necessary to begin a sustained trending move.
So, to determine whether the current in the market is low, the KCVF will grey out all bars whose average price is within the .
If the average price breaks out of the , it is reasonable to assume we are in a high-volatility period. Thus, this is the ideal time to enter a trending trade due to the assumption that trends are more likely to start during these high-volatility periods.
HOW DO I READ THIS INDICATOR
When the candles are greyed out, don't take any trend trades since the current is less than the usual experienced in the market.
When the candles aren't greyed out, take all valid with-trend trades since the current is greater than the usual experienced in the market.
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.