The Lash Out Oscillator (LOO) is designed to indicate local tops and bottoms of the considered asset when the price considerably 'lashes out', based on normalized price deltas. It also features divergences that can be used for trading. The LOO is mainly used for Ethereum (ETH) and Bitcoin (BTC), but can in theory be used for every asset. Customization of the input settings is then needed to match the boundaries well to the historic price data. The default parameters are tuned for Ethereum.
- Default input settings are tuned for Ethereum (ETH/USD) on Kraken on daily (D) timeframe.
- Generally best used on daily (D) timeframe. You might also want to test the 4-hourly (4H) timeframe.
- After applying the indicator to the chart, one typically has to zoom into the oscillator as the raw price delta is also plotted (in blue) which often overshadows the oscillator in magnitude.
- For all other assets besides Ethereum, the oscillator and boundary values have (very likely) to be adjusted.
- All individual pieces can be hidden from the chart (especially important as one might want to hide the blue raw price delta as it could disturb the process of tuning the oscillator due to automatic zoom-outs).
Input Settings for Bitcoin
Aside from Ethereum (default settings), I provide the following settings which can be used for Bitcoin (BNC:BLX) on daily (D) timeframe:
Averaging Length: 20
Donchian Length: 40
Donchian Scaling: 0.2
Fixed Red High: 6.1
Fixed Red Low: 2.3
Fixed Green High: -2.3
Fixed Green Low: -6.1
Still, feel free to tune the LOO to your liking.
Differences to Classic Oscillators as e.g. Relative Strength Index (RSI)
Classic oscillators as the RSI feature fixed limit values (e.g. 0 to 100 for the RSI) and are therefore (as the name says) very relative (you cannot reliably guess tops or bottoms just from the RSI value). The LOO features non-fixed limit values (they can theoretically go to infinity, but are in practice very well contained within some range), leading to less relativity and more absolute behaviour, which is beneficial in spotting local tops and bottoms. Just as the RSI, the LOO shows (bullish and bearish) divergences on the chart, which can be used for refined trading.
Given are two boundary types:
- Fixed boundary areas
- Donchian channels
Normally one should look out for the LOO to hit the red or green fixed boundary areas. Although the range is in theory infinite, the fixed areas give good hints when a local top could be hit, at least for the Ethereum case. For additional trades one can look for the LOO to hit the Donchian channels. Note that these areas/channels have to be adjusted by hand for all other assets besides Ethereum. General trading ideas are:
- After the red (green) area is hit, a short- to mid-term (depends on market phase) short/hedge (long) trade might be in order.
- During full bullruns (bearmarkets), the LOO can extend a bit more into the red (green) area. Here look out for bearish (bullish) divergences to possibly enter mid-term trades.
- After the upper (lower) Donchian channel is hit, a short/hedge (long) trade could be wagered.
Alerts are built-in that trigger when the LOO crosses into the red or green fixed boundary regions.
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