It uses the close of the candle and 2 EMAs.
The faster moving line is the difference between the close and the Slow , while the slower moving line shows the difference between the Fast and the Slow .
There are a couple of ways you can use this indicator, depending on your trading style :
For the quick profit, in and out :
- enable the safer trading option and keep smoothing at the default setting, buy when both lines are green, sell when both line are red and get out when one of the lines changes color (or when profit target is reached) (see the top option)
For longer trades :
- you can increase the smoothing, use a higher Slow and disable the Safer trading option, enter either when both lines have the same color, either on a crossover. (the bottom option)
In both cases, if both lines hover around the zero line, the trend is definitely not strong.
Much more options are available so I would love to hear how you use this indicator. A thumbs up if you like it would be highly appreciated :)
Works nicely together with my other indicators below :
To add this indicator (or any other) to your chart, click the "Add to favorites" button. Then while having the chart you wish to apply it to open, click on Indicators > Favorites > EMADiff v01 (or any other indicator that you favorited.
//@version=1 // this code uses the difference between the close of a candle and the slow EMA on one hand // and the difference between the slow EMA and the fast EMA on the other hand // Use : if both lines color green : buy, if both lines color red : sell // Advice : // - watch price action and eventual support/resistance to try and eliminate false entries // - use an ADX indicator in order to determine what moves are backed by momentum // - for safer entries wait till both lines are above zero for buying, below zero for selling // You can select to smoothen both lines by enabling it in the settings // You can adapt the EMA settings to your likings, higher EMAs will smoothen out more and thus show less color changes study(title='[NM] EMADiff v01', shorttitle='EMADiffv01', overlay=false) fastEMA = input(title = 'Fast EMA (default = 12)', type = integer, defval = 12) slowEMA = input(title = 'Slow EMA (default = 26)', type = integer, defval = 26) smooth = input(title='Smooth ? (default = Yes)', type=bool, defval=true) smap = input(title='Smooth factor (default = 10)', type=integer, defval=10, minval=2, maxval=20) sigma = input(title='Sigma default = 6)', type=integer, defval=6) safer = input(title='Show safer trades (default = yes)', type = bool, defval = true) emadiff = ema(close,fastEMA) - ema(close,slowEMA) emadiffp = close - ema(close,slowEMA) ep = smooth ? alma(emadiffp, smap, 0.9, sigma) : emadiffp ef = smooth ? alma(emadiff, smap, 0.9, sigma) : emadiff pcolor = safer ? (ep > ep and ef > ef ? green : ep < ep and ef < ef ? red : yellow) : ep > ep ? green : red fcolor = safer ? (ef > ef and ef > 0 ? green : ef < ef and ef < 0 ? red : yellow) : ef > ef ? green : red plot(title='EMA Difference', series=ef, style=line, linewidth=2, color= fcolor) plot(title='Difference to close', series=ep, style=line, linewidth=2, color= pcolor) plot(0,title='zero line', color= gray, linewidth=1)