It is typical to use a moving average indicator ( , , or TMA) to identify the trend of an asset. Standard moving averages indicators smooth the price and doesn’t stick very closely to the actual price, showing potential lagging information.
In order to have a trendline that sticks to the price, we are going to use a as it puts more weight on recent candles and less on past candles. The weight is usually calculated using the distance from current candle to the other candles used in the calculation. We have the following formula for the standard calculation as implemented in TradingView :
WMA_standard = (Price1 * Weight1 + …… + PriceN * WeightN)) / (Weight1 + …… + WeightN)
This “Trend Sniper” indicator uses an additional coefficient to alter even more the weight of each candle.
WMA_with_coefficient = (Price1 * (Weight1 - Coefficient) + …… + PriceN * (WeightN - Coefficient)) / ((Weight1 - Coefficient) + …… + (WeightN - Coefficient))
- MA source : Source used for moving average calculation (ex : “close”)
- MA length : Length of the moving average. Higher values will give a smoother line, lower values will give a more reactive line.
- Use extra smoothing : Enable/disable usage of a to extra smooth the line curve. If activated the indicator may be lagging, but it will also avoid many false buy/sell signals.
- MA extra smoothing length : Length of the moving average of the extra smoothing.
- Change candle colors : Enable/disable painting the candles of the chart with the colors of the .
- Display buy/sell signals : Display buy/sell signals (circles) when the moving average is changing direction
This indicator has 3 possible visualizations :
- Moving Average line : the line represents the that is following the price of the asset, when the line goes up we are in a uptrend (green line) when the line goes down we are in a downtrend (red line).
- Candle coloring : the color of the moving average line can be applied to the candles of the chart for better readability.
- Signals : Buy/Sell signals can be displayed at the bottom of the chart
This indicator can help analyze the trend directional changes :
- First of all, if the moving average line is under the price (or above the price), then we can assume that the uptrend is strong (or downtrend is strong).
- If the current candle crosses the moving average line, it is the first sign that the trend is weakening and possibly starting to revert.
- If the is changing direction, then the trend change is confirmed and the color of the line changes
Added signals and alerts for trend weakening
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.
Yes it is planned soon to add alerts :)