Hi Everyone,
I have attached an indicator that I have developed that shows the strength of a currency pair. It is based on the current price, compared to the highs and lows based on a trend period that can be defined in the settings on the indicator. This is effectively a price action indicator.
So for example, the default settings in the indicator, the 'TrendPeriod' setting is set to 50. The indicator then looks at current price on the 50 day SMA to find the overall trend, current price above the 50SMA - we look for long positions, current price below the 50SMA - we look for short positions.
Now we know the overall trend, the indicator now looks for the highest and lowest prices within the last 50 days and based on where the current price is in relation to the highest and lowest prices, it calculates an value between +50 and -50, were +50 is a strong trend and -50 is a weak trend. The closer the value is to the +50, the better the chances are for positon in the direction of the overall trend.
The indicator then looks at the 4 hour chart, find the highest and lowest prices in the previous 50, 4 hours periods and again calculates a trend strenght based on the current price.
The process is repeated 2 more times for the H1 and M5 periods.
Once the indicator has ran through the above calculations, it displays on the chart, the direction of the overall trend along with the trend strength value for the D1, H4, H1 and M5 periods.
How can this be used for trading?
When the indicator is displaying a strength value greater the zero, the price is heading in the general direction of the overall trade.
Personally, I enter trades in the direction of the trend when the trend strength value is greater than following default values - D1: 25, H4: 31.25, H1: 37.5, M5: 43.75. When the trend strength values are above these default values, new highs\lows are being created and the overall trend is strong.
When the trend strength values move above the default settings for each time period, the indicator will display whether to trade or not, and in which direction to trade.
In the attached images, the EURGBP is showing strong short trending signals, the D1 is at 49.46 (>25), H4 is 48.28 (>31.25), H1 is 46.75 (>37.5) and M5 is 33.78 (wait until greater than 43.75).