LT Trigger-Edge 2.0
The indicator uses two types of measuring the trend, momentum and potential trend reversals. One uses a set of key moving averages, the other uses a combination of oscillators such as RSI and stochastics.
In LT Trigger, we combine two key averages, one fast and one slow – such as the 8 EMA and 21 EMA respectively. When the moving averages crossover in a positive direction so that the fast EMA crosses above the slow EMA (e.g. when the 8 EMA crosses above the 21 EMA) the price bars are coloured green. The price bars then remain green as long as the 8 EMA remains above the 21 EMA. Similarly, when the moving averages crossover in a negative direction so that the fast EMA crosses below the slow EMA (e.g. when the 8 EMA crosses below the 21 EMA), then the price bars are coloured magenta – and they remain magenta as long as the 8 EMA remains below the 21 EMA.
The idea is to show the probable momentum and trend behind the move, because when the 8 EMA crosses above the 21 EMA the probability of upward momentum and trend usually increases. Similarly, when the 8 EMA crosses below the 21 EMA, the probability of a downward momentum and trend usually increases.
With the LT Trigger we can quickly and visually identify how the moving averages are positioned without actually placing them on the chart (although the option to add the moving averages to the chart is also available in the indicator). We can also visually tell the momentum behind the move by looking at the colour of the price bars (green for positive or bullish, red for negative and bearish).
It should be remembered that in times when the price action becomes very choppy and sideways – such as low volatility conditions when the ADX (average directional index) is below 20 – it is possible for the moving averages to crossover many times in positive and negative directions. This can significantly increase the odds of false signals (or false positives). Therefore, chartists have the option to use the LT Trigger indicator in combination with ADX to lower the frequency or probability of false signals (although they cannot be completely eliminated). Alternatively, a better option is to only follow signals that are in the direction of the major trend or the higher timeframe trend. For example, if the higher timeframe major trend is upwards (i.e. an uptrend), then on the lower timeframe, the bullish or positive EMA crossovers may have a slightly higher probability. Vice versa also applies: if the higher timeframe major trend is downwards, then bearish or negative EMA crossovers on the lower timeframe may have a slightly higher probability.
The chartist can also alter the choice of moving averages they may choose for crossovers – for example instead of the 8 and 21 EMA crossover, they may choose 21 and 55 EMAs or 5 and 13 EMAs for crossovers. LT Trigger also has a feature which turns the bar orange if at the time of the EMA crossover, the RSI is overbought or oversold (depending on if it is a positive or negative crossover). So for example, if at the time of the EMA crossover the RSI is overbought, the bar turns orange as a warning. The same applies if the RSI is oversold at the time of the EMA crossover, the bar turns orange.
The LT Trigger also typically shows where a stoploss may be placed to limit risk after a moving average crossover has taken place. The stoploss is usually at the most recent support or resistance (depending on whether the trigger signal was positive or negative). For example, in a positive crossover (where the 8 EMA crosses above the 21 EMA), the stoploss is shown as a blue dot under the lowest point of the previous 40 bars approximately. Similarly, in a negative crossover (where the 8 EMA crosses below the 21 EMA), the stoploss is shown as a blue dot above the highest point of the previous 40 bars approximately. The chartist can also choose to display the previous historic stops as well.
In the LT Edge indicator we combine RSI and stochastics to identify points of extreme overbought or extreme oversold – and potential levels and conditions where the price may reverse. This is usually a counter-trend indicator rather than a trend-following indicator. Therefore, as with all counter-trend indicators, the odds of false signals can often increase with this type of indicator. However, it can also be used as a trend-following indicator if only used in the direction of the higher timeframe trend and momentum (as explained below).
In LT Edge, when both RSI and stochastics reach points of extreme overbought or extreme oversold, the bar turns first yellow and then red. The yellow bar signal acts as a warning and the red confirms the signal. Although the yellow signal on its own is enough to show overbought/oversold conditions, we like to wait one more bar for the red signal for the price to “react” to the overbought/oversold conditions. This is because after the yellow overbought/oversold signal the price can sometimes move further in its original direction (i.e. overbought can become more overbought and vice versa).
The way chartists can determine the difference between the overbought and oversold signals with LT Edge is to see where price is in relation to its 8 EMA (shown as a blue line). If price is rallying and above its 8 EMA when the yellow/red edge signals occur, then price is likely overbought. If price is falling and below its 8 EMA, then the yellow/red edge signals are showing the price is likely oversold.
As a way to minimise the odds and frequency of false signals and the risk of price continuing to move in its original direction, chartists can wait until price has reversed and closed beyond its 8 EMA (the blue line). For example, if price has been rallying and is above its 8 EMA, and then we get the LT Edge yellow/red overbought signals, then chartists can wait until price has dropped and closed below its 8 EMA to increase the odds of a potential reversal (e.g. a trend reversal or a temporary reversal leading to a correction). Similarly, if price has been falling and is below its 8 EMA, and then we get the LT Edge yellow/red oversold signals, then chartists can wait until price has bounced and closed above its 8 EMA to increase the odds of a potential reversal (again, either a trend reversal or a temporary correction). In both situations, when price has closed beyond its 8 EMA after an LT Edge yellow/red signal, the price bar can turn grey. The grey bar means that price has closed beyond its 8 EMA immediately after the yellow/red signal.
The LT Edge can help in identifying overbought and oversold conditions in the chart but also identify points where we may potentially see a reversal in the trend – or at least a temporary correction in the price. After a yellow/red edge signal, if price does not immediately reverse direction, it can mean that price may continue moving in its original direction. A stoploss is therefore very important in limiting and controlling risk. As a simple stoploss method, chartists can use 2 x ATR (average true range) for a stoploss and risk control method. For example, if price has been rallying and is above its 8 EMA, and then we get a yellow/red edge signal (showing overbought conditions), then chartists may use 2 x ATR to measure where the stoploss should go (e.g. if the ATR is 100 points when the red bar signal occurs, then we multiply the ATR reading by 2 to get 200 points, and we place our stoploss 200 points above the red bar close). As soon as price reverses and closes beyond its 8 EMA (i.e. closes below its 8 EMA as explained above) then the stoploss can be tightened and moved lower to reduce risk. The stoploss can also be moved closer to the breakeven point. Vice versa applies in conditions where price has been dropping when the yellow/red edge signal occurs – we would use 2 x ATR to measure where the stoploss can go (i.e. placing the stoploss below the red bar signal), and then as soon as price bounces and closes above its 8 EMA, the stoploss can be tightened and moved higher closer to breakeven to reduce risk. It should be noted that this is a very risky strategy as it is counter-trend and usually against the momentum. Plus the fact that there is no guarantee or certainty that price will reverse after the yellow/red edge signal - this is only a probability. To increase the odds slightly, chartists can wait until price has shown some indications of a potential reversal by at least closing beyond the 8 EMA (as explained before). The risk of false signals are always present.
To increase the odds, chartists can combine the LT Edge with the higher timeframe trend and momentum plus support/resistance. For example, if the higher timeframe trend and momentum is up (e.g. an uptrend), then the bullish LT Edge signals on the lower timeframe at or near a key support level could have a higher probability (as they are in the direction of the major trend). Similarly, if the higher timeframe trend and momentum is down (e.g. a downtrend), then the bearish LT Edge signals on the lower timeframe at or near a key resistance level could have a higher probability (as they are in the direction of the major trend). In other words, one can make the LT Edge indicator a trend-following indicator provided we use multiple timeframe analysis (i.e. using the higher timeframe trend and momentum) plus support/resistance. Signals which are counter-trend and against the higher timeframe trend could have a lower probability.
Chartists should be aware of the probabilistic and uncertain nature of price action and the markets, and therefore prepare to limit and control any potential risks. The indicator can be used on the charts of the majority of markets (e.g. stocks, indices, ETFs, currencies, cryptocurrencies, precious metals, commodities etc.) and any timeframe. It should be noted that the degree of noise and randomness increases significantly on lower timeframes. So the lower the timeframe that is chosen (e.g. 15-min or lower) the greater the degree of noise and randomness and therefore the higher the frequency of false signals or whipsaws. The indicator can be applied to candlesticks and OHLC bar charts. Chartists can choose to combine the LT Trigger with LT Edge or have them display separately.
If you would like access, please send me a PM on Tradingview.
In LT Trigger, we combine two key averages, one fast and one slow – such as the 8 EMA and 21 EMA respectively. When the moving averages crossover in a positive direction so that the fast EMA crosses above the slow EMA (e.g. when the 8 EMA crosses above the 21 EMA) the price bars are coloured green. The price bars then remain green as long as the 8 EMA remains above the 21 EMA. Similarly, when the moving averages crossover in a negative direction so that the fast EMA crosses below the slow EMA (e.g. when the 8 EMA crosses below the 21 EMA), then the price bars are coloured magenta – and they remain magenta as long as the 8 EMA remains below the 21 EMA.
The idea is to show the probable momentum and trend behind the move, because when the 8 EMA crosses above the 21 EMA the probability of upward momentum and trend usually increases. Similarly, when the 8 EMA crosses below the 21 EMA, the probability of a downward momentum and trend usually increases.
With the LT Trigger we can quickly and visually identify how the moving averages are positioned without actually placing them on the chart (although the option to add the moving averages to the chart is also available in the indicator). We can also visually tell the momentum behind the move by looking at the colour of the price bars (green for positive or bullish, red for negative and bearish).
It should be remembered that in times when the price action becomes very choppy and sideways – such as low volatility conditions when the ADX (average directional index) is below 20 – it is possible for the moving averages to crossover many times in positive and negative directions. This can significantly increase the odds of false signals (or false positives). Therefore, chartists have the option to use the LT Trigger indicator in combination with ADX to lower the frequency or probability of false signals (although they cannot be completely eliminated). Alternatively, a better option is to only follow signals that are in the direction of the major trend or the higher timeframe trend. For example, if the higher timeframe major trend is upwards (i.e. an uptrend), then on the lower timeframe, the bullish or positive EMA crossovers may have a slightly higher probability. Vice versa also applies: if the higher timeframe major trend is downwards, then bearish or negative EMA crossovers on the lower timeframe may have a slightly higher probability.
The chartist can also alter the choice of moving averages they may choose for crossovers – for example instead of the 8 and 21 EMA crossover, they may choose 21 and 55 EMAs or 5 and 13 EMAs for crossovers. LT Trigger also has a feature which turns the bar orange if at the time of the EMA crossover, the RSI is overbought or oversold (depending on if it is a positive or negative crossover). So for example, if at the time of the EMA crossover the RSI is overbought, the bar turns orange as a warning. The same applies if the RSI is oversold at the time of the EMA crossover, the bar turns orange.
The LT Trigger also typically shows where a stoploss may be placed to limit risk after a moving average crossover has taken place. The stoploss is usually at the most recent support or resistance (depending on whether the trigger signal was positive or negative). For example, in a positive crossover (where the 8 EMA crosses above the 21 EMA), the stoploss is shown as a blue dot under the lowest point of the previous 40 bars approximately. Similarly, in a negative crossover (where the 8 EMA crosses below the 21 EMA), the stoploss is shown as a blue dot above the highest point of the previous 40 bars approximately. The chartist can also choose to display the previous historic stops as well.
In the LT Edge indicator we combine RSI and stochastics to identify points of extreme overbought or extreme oversold – and potential levels and conditions where the price may reverse. This is usually a counter-trend indicator rather than a trend-following indicator. Therefore, as with all counter-trend indicators, the odds of false signals can often increase with this type of indicator. However, it can also be used as a trend-following indicator if only used in the direction of the higher timeframe trend and momentum (as explained below).
In LT Edge, when both RSI and stochastics reach points of extreme overbought or extreme oversold, the bar turns first yellow and then red. The yellow bar signal acts as a warning and the red confirms the signal. Although the yellow signal on its own is enough to show overbought/oversold conditions, we like to wait one more bar for the red signal for the price to “react” to the overbought/oversold conditions. This is because after the yellow overbought/oversold signal the price can sometimes move further in its original direction (i.e. overbought can become more overbought and vice versa).
The way chartists can determine the difference between the overbought and oversold signals with LT Edge is to see where price is in relation to its 8 EMA (shown as a blue line). If price is rallying and above its 8 EMA when the yellow/red edge signals occur, then price is likely overbought. If price is falling and below its 8 EMA, then the yellow/red edge signals are showing the price is likely oversold.
As a way to minimise the odds and frequency of false signals and the risk of price continuing to move in its original direction, chartists can wait until price has reversed and closed beyond its 8 EMA (the blue line). For example, if price has been rallying and is above its 8 EMA, and then we get the LT Edge yellow/red overbought signals, then chartists can wait until price has dropped and closed below its 8 EMA to increase the odds of a potential reversal (e.g. a trend reversal or a temporary reversal leading to a correction). Similarly, if price has been falling and is below its 8 EMA, and then we get the LT Edge yellow/red oversold signals, then chartists can wait until price has bounced and closed above its 8 EMA to increase the odds of a potential reversal (again, either a trend reversal or a temporary correction). In both situations, when price has closed beyond its 8 EMA after an LT Edge yellow/red signal, the price bar can turn grey. The grey bar means that price has closed beyond its 8 EMA immediately after the yellow/red signal.
The LT Edge can help in identifying overbought and oversold conditions in the chart but also identify points where we may potentially see a reversal in the trend – or at least a temporary correction in the price. After a yellow/red edge signal, if price does not immediately reverse direction, it can mean that price may continue moving in its original direction. A stoploss is therefore very important in limiting and controlling risk. As a simple stoploss method, chartists can use 2 x ATR (average true range) for a stoploss and risk control method. For example, if price has been rallying and is above its 8 EMA, and then we get a yellow/red edge signal (showing overbought conditions), then chartists may use 2 x ATR to measure where the stoploss should go (e.g. if the ATR is 100 points when the red bar signal occurs, then we multiply the ATR reading by 2 to get 200 points, and we place our stoploss 200 points above the red bar close). As soon as price reverses and closes beyond its 8 EMA (i.e. closes below its 8 EMA as explained above) then the stoploss can be tightened and moved lower to reduce risk. The stoploss can also be moved closer to the breakeven point. Vice versa applies in conditions where price has been dropping when the yellow/red edge signal occurs – we would use 2 x ATR to measure where the stoploss can go (i.e. placing the stoploss below the red bar signal), and then as soon as price bounces and closes above its 8 EMA, the stoploss can be tightened and moved higher closer to breakeven to reduce risk. It should be noted that this is a very risky strategy as it is counter-trend and usually against the momentum. Plus the fact that there is no guarantee or certainty that price will reverse after the yellow/red edge signal - this is only a probability. To increase the odds slightly, chartists can wait until price has shown some indications of a potential reversal by at least closing beyond the 8 EMA (as explained before). The risk of false signals are always present.
To increase the odds, chartists can combine the LT Edge with the higher timeframe trend and momentum plus support/resistance. For example, if the higher timeframe trend and momentum is up (e.g. an uptrend), then the bullish LT Edge signals on the lower timeframe at or near a key support level could have a higher probability (as they are in the direction of the major trend). Similarly, if the higher timeframe trend and momentum is down (e.g. a downtrend), then the bearish LT Edge signals on the lower timeframe at or near a key resistance level could have a higher probability (as they are in the direction of the major trend). In other words, one can make the LT Edge indicator a trend-following indicator provided we use multiple timeframe analysis (i.e. using the higher timeframe trend and momentum) plus support/resistance. Signals which are counter-trend and against the higher timeframe trend could have a lower probability.
Chartists should be aware of the probabilistic and uncertain nature of price action and the markets, and therefore prepare to limit and control any potential risks. The indicator can be used on the charts of the majority of markets (e.g. stocks, indices, ETFs, currencies, cryptocurrencies, precious metals, commodities etc.) and any timeframe. It should be noted that the degree of noise and randomness increases significantly on lower timeframes. So the lower the timeframe that is chosen (e.g. 15-min or lower) the greater the degree of noise and randomness and therefore the higher the frequency of false signals or whipsaws. The indicator can be applied to candlesticks and OHLC bar charts. Chartists can choose to combine the LT Trigger with LT Edge or have them display separately.
If you would like access, please send me a PM on Tradingview.
Follow this link to obtain access: www.leadingtrader.com
You may also email: support@leadingtrader.com
You may also email: support@leadingtrader.com