Whether the current trend is strong enough to trade it.
When a new trend may start.
combines changes in price (range) and . Here is the formula:
= (High – Low) *
The indicator has bars of four colours. Each colour has a specific meaning and shows how the market responds to a change in .
Green. A green bar forms in the situation that both and the are up. It means that more and more traders join the market in the current direction. In other words, it points to a strong trend, so you can open trades in line with this trend.
Brown. A brown bar appears when both and the decline. It is also called “fade”. It signals that traders are hesitating and don’t want to continue the trend anymore. As a result, it’s not recommended to join the trend. Several brown bars are a sign of the potential reversal of the trend.
Blue. A blue bar forms when increases, but the declines. A spike in price may be short-lived a precede a change in the trend. Blue bars appear at the times when newbies enter the trend, but professional traders know that it’s already too dangerous.
Pink. A pink bar, also known as squat, appears when is diminishing, but the is growing. It reflects an increase of trading interest and an active fight between buyers and sellers. After one of the sides wins, the price will likely make a big move breaking support or resistance levels. The , however, can’t be used to determine the direction of the breakout.