The first criteria (called “volatility trend) colours the bars (blue or red) based on one of the indicators which we use that measures momentum and the key level. When price is closed above this level, the bars are coloured blue and when price closes below this level the price bars turn red. The purpose is to show the likely trends, swing in price and path of least resistance, specially in the short term (depending on the timeframe chosen).
The second criteria (optional) uses the average range of the last 7 bars (although the period can be changed by the user). It colours the bars blue or red based on the average range and momentum bias of the past 7 bars. In this respect, it is slower to react to the constant “noise” and in the price action by smoothing out a lot of the noise (depending on which setting one has chosen e.g. period of default 7 or lower). If the or range of the next bar exceeds the average range of the previous 7 bars in an opposite direction (e.g. opposite directional momentum), the colour of the bars may change. For example, if the previous bar has been blue, and the range of the next bar is greater than the average of the previous 7 bars in the downward direction, the colour of the bars could likely turn red. This second (optional) criteria can be chosen by deselecting (unticking) the “volatility trend” criteria in the settings.
The main idea behind the indicator is to be able to observe the probable short term trends in the price, and to smooth out a lot of the bar-by-bar (or candle-by-candle) and up/down action. If the bars are blue, this is a potentially sign, as it often means that “bulls” may have the edge. The reverse is the case for red bars, as it is a sign – or that “bears” may have the edge. Usually 2 consecutive bars of the opposite colour can signify a potential trend change (although one bar of the opposite colour can also suffice).
The indicator also incorporates a “trend following pivot” – shown by a yellow dot. This indicator waits for a pullback (or retracement) to either the 21 and 34 - shown by blue and pink lines respectively - and when the price bounces off or “pulls away” from either of these EMAs by a certain degree, the indicator then shows the yellow trend following as a yellow dot. For example, if price is in an uptrend, then price pulls back to the 21 or 34 , and then bounces off either of these levels by a certain extent, we may then see a yellow dot (or ) at the lowest most recent point (which would then become support). The yellow dot (or ) can indicate that the uptrend could potentially continue, provided price remains above the (yellow dot). Similarly, in a downtrend example, if price pulls back to either the 21 or 34 , then price gets rejected from these levels by a certain extent (so that price then falls back below these EMAs again), we may see a yellow dot at the highest recent point (which would become resistance). The yellow dot (or ) can indicate that the downtrend could potentially continue provided price remains below the (yellow dot).
The “ultra” overbought and oversold signal colours the bars orange when price hits an extreme “overbought” or “oversold” level. Usually the price tends to reverse direction or start a correction when it reaches an extreme “overbought” or “oversold” level. Of course, it is possible for the price to ignore overbought/oversold readings – and if the price ignores the orange “ultra” signal by continuing in its original direction, it can mean that the momentum or trend is stronger than originally anticipated. Often the orange “ultra” signal can also mean that it may be time to tighten stops (specially as the risk or probability of a pullback or reversal increases).
Chartists should be aware of the probabilistic and uncertain nature of price action and the markets, and therefore prepare to limit and control any potential risks.
The indicator can be used on the charts of the majority of markets (e.g. stocks, indices, ETFs, currencies, cryptocurrencies, precious metals, etc.) and any timeframe. It should be noted that the degree of noise and randomness increases significantly on lower timeframes. So the lower the timeframe that is chosen (e.g. 15-min or lower) the greater the degree of noise and randomness and therefore the higher the frequency of false signals or whipsaws. The indicator can be applied to , bar, line, line break, range and renko charts.
If you would like access, please send me a PM on Tradingview.
Access to this script is restricted to users authorized by the author and usually requires payment. You can add it to your favorites, but you will only be able to use it after requesting permission and obtaining it from its author. Contact LeadingTrader for more information, or follow the author's instructions below.
TradingView does not suggest paying for a script and using it until you 100% trust its author and understand how the script works. In many cases you can find a good open-source alternative for free in our Public Library.
Warning: please read before requesting access.