This is a simple SMA based indicator that I have, for lack of a better term, called directional sentiment line.
How it works:
The ribbon/band:
The main band tracks 4 SMAs, the Open, High, Low and Close. The user can input the length for lookback time, I do 75 and I have it defaulted at 75, however you can do whatever time frame you prefer.
The color of the indicator changes based on the overall trend. Green means an uptrend and red means a downtrend.
When the stock is trading within the band, you generally want to avoid a trend until you see a break out one way or the other. In the image below, you see the green arrow pointing to an area where it re-tests the band but the band remains green to affirm there is support. It then bounces off. The red arrow, you see that the band is flashing red, meaning that it seems to be losing support and its best to wait for a break out one way or the other prior to taking the trade:
The outer lines:
You will see the two outer bands which generally appear blue while a stock is trading within them. These are the SMAs of the highest high and lowest low in your defined period (default 75). They can act as moving targets.
When the colour of one of them changes orange, it means the stock is trading above or below them. If the highest high turns orange, it means the stock is trading high above the bands and highest high SMA. Inverse for the lowest low. See the image below:
The purple arrows are pointing to these max band lines and show how they change colour depending on the location of the highest high.
How to use it:
So I made this simply to give me a reference point for day trades off open. However, looking at the large timeframes, I do see there is quite a lot of potential for larger timeframe analyses as well.
I recommend playing around with it and seeing what you like. But I can give you the rules I use for this as a day trading aid:
My Rules:
1. If stock opens below DSL, wait to see if it will retest. It naturally likes to continually make contact with the DSL line at random intervals:
2. If stock opens above DSL, again wait for re-test:
A hold above DSL = Bullish A break and hold below DSL = bearish
3. When playing a breakout (sentiment shift from bearish to bullish or vice versa), wait for a retest of the line because frequently, there are fakeouts:
A re-test and bounce off the line confirms a breakout. A re-test and fails confirms a continuation of the predominate sentiment.
For further reference, I have done a tutorial video below:
Let me know your questions, comments and suggestions below!
Thanks!
Notas de Lançamento
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DSL 2.0
Updated and revised with new features and look:
Update includes:
Plot Crossovers and unders with Arrows
ATR Range Targets for Crossovers and Crossunders displayed by a target box
Cleaned the look and softened the colours.
Notas de Lançamento
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Quick fix.
Notas de Lançamento
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Last fix, promise!
Notas de Lançamento
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Modified the crossover condition to filter false signals.
Notas de Lançamento
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Added buy and sell signals based on distance from the ribbon.
You can toggle the train time in the settings menu. The default is 500 candles back.
You can also disable and enable all of the functions you want/don't want. If you want to use the traditional version, you can disable the added features!
I really am looking forward to testing this indicator. Looks promising
Mr_Clark_SD
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Hi Steve, thanks for these updates. DSL has been in my tool box since you first put it up. On this version I have a few questions: 1. Did you eliminate the outer bands 2. What is the difference between a signal triangle indicators and the ones with text (i.e a call out box which has 'short' in the text) 3. It looks like there is now a target box green/red but only in one direction - Am I correct to assume this is because that would be the 'immediate' target zone for the prefered time frame?
Steversteves
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@Mr_Clark_SD, Hey! The outerbands are still there but they are defaulted to off, if you open the settings you will see the options. If you want to use it with just the original settings, you can just disable everything and re-enable the outer bands.
The triangles are just signaling a successful "cross and hold", meaning that the stock has cross up or crossed down and has held this cross (my definition of holding a cross is 3 closes above which has been put into the indicator). Again, you can disable this if you want.
The short and sell signal is based on Eucledian Distance from the moving average. Anytime it at the max distance from the DSL, either up or down, it will alert you with a corresponding short or long signal.
Oh and you are correct, the boxes are the expected move from a cross. These can also be disabled.
The outer bands you are talking about are the "Highest and Lowest Price Targets" in the settings.
@Steversteves, so it's funny - I see the option for highest and lowest and had tried those before asking. Just tried again, but toggling them does nothing and I do not see the outer bands - maybe a conflict with another indicator? Although I did disable everything else (not removed entirely) and still no.