What up guys and welcome to the CoffeeShop. This is your host and "baristo", Eric.
This is a simple little set of 3 moving averages. Smoothed moving averages that you can use in the 10 /28 strategy, or any other strategy you choose.
Among themselves there is nothing special about these moving averages, but because of their settings they will help you find entries for long and short positions and for divergence trading.
These moving averages have conditional colors built into the code, using the pinescript "color from gradient" feature.
All three moving averages, are green when they are all lined up in a bullish form.
All three are red when they're all lined up in a bearish form.
And they are colored Gray when price action and the moving averages are mixed up in any way.
But this is not enough to help you determine whether you have a true trend or not also it is not enough to tell you whether you have a strong or weak trend so there's more.
Add to this color command, the candles are colored ONLY when there is a true uptrend or downtrend.
If you believe for any reason that price action is telling you this is going to a a short term trend, you can
wait for your long or short color confirmations and then drop down to a lower timeframe to make your trades.
for a strong uptrend you would look for the candles to close bullish above all three green moving averages that were already lined up. This would be a strong uptrend. If price action closed below all three downward lined up moving averages they were all red and your candle is red then you have a strong downtrend.
However if your candle closes bearish and it closes red below a mixed set of moving averages then you have a week downtrend.
The same applies if you have a bullish closing candle but your fast and medium moving average are facing up however they are below your slow moving average. You may have a green line up however if you're moving averages are mixed up then you have a weak trend.
In short a strong trend is when you close above or below moving averages that are lined up in the same direction and they are not mixed in any way. A weak trend is when you close above or below your fast and medium moving averages as they're lined up in that same direction however they are on the wrong side of your third moving average.
When you have a weak trend you should be scalping and when you have a strong trend you should be able to ride that trend more appropriately.
Newly defined color inputs to show when price itself is ranging aside from moving averages getting mixed up.
Now you can see when price action re-enters ranging moving average and price itself loses trend.
You can also see when you break away from moving averages with price, does your closing candle maintain its momentum.
Trending Color = The color you want to use for your candles to show you have price action trending.
NON-Trending Color = The color you want to use for your candles to show you do not have a good trend of price movement.
This color coding system now uses the "color from gradient" feature known in pinescript to help determine the strength of the trend.
The Strength is determined by a combination of Choppiness Index, the value of the RSI, and an ATR value * 1
The Choppiness Index was created by Australian commodity trader E.W. Dreiss.
Who created an indicator that is designed to determine if the market is choppy (trading sideways) or not choppy (trading within a trend in either direction). The Choppiness Index is an example of an indicator that is not directional at all. CHOP is not meant to predict future market direction, it is a metric to be used to for defining the market's trendiness only. A basic understanding of the indicator would be; higher values equal more choppiness, while lower values indicate directional trending.
J. Welles Wilder created the ATR and featured it in his book New Concepts in Technical Trading Systems
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