Madrid

Madrid Trend Trading

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Madrid Trend Trading is an indicator that shows Momentum direction and strength based on a given trend (pair of MA's). It is useful to detect the direction of the trend, Momentum divergences with the trend and possible trend reversals.
Parameters
1. Fast MA Length
2. Slow MA Length
3. Signal Length

Trading with MTT            
1. MTT             > 0 and increasing (Lime) : Long position
2. MTT             > 0 and decreasing (Green) : entry/exit long position, take profits or plan an entry
3. MTT             < 0 and decreasing (Red) : Short position
4. MTT             <0 and increasing (Maroon) : entry/exit short position, take profits or plan entry

This shows the market waves, it's a good indicator for swing trading since it shows the change of direction of the trend, signals profit areas and entry/exit regions. Change in the direction of the trend can be spotted by the cross over the zero line or by trend divergences, H-H in the trend and L-H in the MTT             indicator means a downtrend is close. L-L in the trend and H-L in the indicator means an uptrend is forming.
There is a bar in the zero line that shows the momentum direction, simple, green it's increasing, red, it's decreasing.
This indicator is meant to be a companion of the MTS             indicator. When combined MTS             shows the direction and strength of the trend, meanwhile MTT             shows if the trend is weakening, gaining strength, confirms continuation or warns a reversal.

What I look from my indicators is to create a tool that filters out as much noise as possible without losing much sensitivity, they have to be easy to tune and simple to analyze, so I normally use contrasting colors, using cold colors for long positions and warm colors for short positions. I try to use the least possible number of parameters and the defaults have been set after several months of testing in Beta mode against hundreds of charts before publishing them.

I hope this effort can help you to have a simpler point of view of the market.
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// Madrid : 6/SEP/2014 10:57 : TrendStrengthBuySell : 2.0
// Buy Sell based on the trend Strength
// http://madridjourneyonws.blogspot.com/

study(title="Madrid Trend Trading", shorttitle="MTT", precision=2)
src =  hl2

// Input parameters
fastMALength = input(34, minval=1, title="Fast Length")
slowMALength = input(89, minval=1, title="Slow Length")
signalMALen = input(13, title="Signal MA")

fastMA = ema(src, fastMALength )
slowMA = ema(src, slowMALength )
trendStrength = (fastMA - slowMA)*100/slowMA
signalMA = sma(trendStrength, signalMALen)

momentum = trendStrength-signalMA
momColor = momentum>0 and change(momentum)>0 ? lime
         : momentum>0 and change(momentum)<0 ? green
         : momentum<0 and change(momentum)>0 ? maroon
         : momentum<0 and change(momentum)<0 ? red
         : gray
         
plot(momentum, style=histogram, linewidth=2, color=momColor)
plot(0, color=change(momentum)>=0?green:red, linewidth=3)



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