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[CS]_ColorCode_V1 Multitimeframe Cardwell Reversals
Today I decided to create a powerful indicator for helping in identifying trend continuation and reversals using Cardwell's famous techniques.
For the whom interested Cardwell's work is widely presented in different textbooks such as "John Hayden" The Complete RSI Guide and accessible online.
From "John Hayden" The Complete RSI Guide:
Wilder (Author of RSI) states in his opinion that the greatest value of the RSI is in pointing out a divergence between the graphs for the RSI and price behavior. Their graphical behavior reveals a bullish divergence (or as he calls
it a bottom failure swing) when the price makes a new low, while the RSI continues under 30 and fails to make a new low. When the RSI proceeds to exceed the previous RSI peak, a short-term buy signal occurs
according to Wilder.
However, what the average investor comprehends is a small part of the dynamic overall picture. For example, if the range effectively shifts in a bull market so
that 80 is overbought, then Andrew Cardwell realized that the support level must also shift. Inversely if the oversold level in a bear market will shift down to 20, then the resistance level in a bear market must also
shift.
Another tools I prefer to use to indicate trend is moving averages, the standard workhorse used by most technical traders. Moving averages are valuable, as they will remove the volatility from whatever they are
calculated from. For example, calculating a moving average based on the RSI, effectively removes the volatility and gives a smoother signal. In fact, the trend can be confirmed by calculating a 9 period simple
moving average and a second 45 period weighted moving average on both the RSI and price.
From Cardwell's famous RSI Workbook, when the:
1. The 9 period on price is above the 45 period on price, and The 9 period on RSI is above the 45 period on RSI the trend is up.
2. The 9 period on price is below the 45 period on price, and The 9 period on RSI is below the 45 period on RSI the trend is down.
3. The 9 period on price is above the 45 period on price, and The 9 period on RSI is below the 45 period on RSI the trend is sideways to up.
4. The 9 period on price is below the 45 period on price, and The 9 period on RSI is above the 45 period on RSI the trend is sideways to down.
Since the RSI is more volatile than the price, the 9 period simple moving average (SMA) on RSI will cross its respective 45 period weighted moving average (WMA) before the 9 period (SMA) on price will cross its
respective 45 period moving average. I place more emphasis on the moving averages based on price than those based on RSI. Staying aware of what the moving averages are doing will help you to stay focused on
the overall trend. When I am talking to another trader, I will often say that the moving average on price is positive.
This implies that the short term, 9 period SMA is, above the longer term, 45 WMA. The largest moves will frequently come when both moving averages are moving in the same direction. One more thought on
moving averages. You will find the moving average 45 WMA will prove to be support or resistance on both price and RSI. For example, you will often see a bullish market retrace to its respective 45 period
moving average (price and/or RSI). When this is observed it is another sign of what the trend actually is.
On the indicator:
1. is represented in Green Color
2. is represented in Red Color
3. is represented in Light-Green-Grey
4. is represented in Light-Pink-Grey
1. + Overbought (RSI Above 80) is represented in Acqua
2. + Oversold (RSI Below 20) is represented in Purple
1. + RSI Turned Bearish (RSI Below 50) is represented in Orange
2. + RSI Turned Bullish (RSI Above 50) is represented in Blue
In Addition a counter is displayed about the positives or negatives timeframes and an average line is computed across timeframes with green / red color comparison.
Timeframes are specified in the indicator panel and are the following:
- Weekly
- Daily
- 12h
- 4h
- 2h
- 1h
- 30 min
Enjoy,
CryptoStatistical
For the whom interested Cardwell's work is widely presented in different textbooks such as "John Hayden" The Complete RSI Guide and accessible online.
From "John Hayden" The Complete RSI Guide:
Wilder (Author of RSI) states in his opinion that the greatest value of the RSI is in pointing out a divergence between the graphs for the RSI and price behavior. Their graphical behavior reveals a bullish divergence (or as he calls
it a bottom failure swing) when the price makes a new low, while the RSI continues under 30 and fails to make a new low. When the RSI proceeds to exceed the previous RSI peak, a short-term buy signal occurs
according to Wilder.
However, what the average investor comprehends is a small part of the dynamic overall picture. For example, if the range effectively shifts in a bull market so
that 80 is overbought, then Andrew Cardwell realized that the support level must also shift. Inversely if the oversold level in a bear market will shift down to 20, then the resistance level in a bear market must also
shift.
Another tools I prefer to use to indicate trend is moving averages, the standard workhorse used by most technical traders. Moving averages are valuable, as they will remove the volatility from whatever they are
calculated from. For example, calculating a moving average based on the RSI, effectively removes the volatility and gives a smoother signal. In fact, the trend can be confirmed by calculating a 9 period simple
moving average and a second 45 period weighted moving average on both the RSI and price.
From Cardwell's famous RSI Workbook, when the:
1. The 9 period on price is above the 45 period on price, and The 9 period on RSI is above the 45 period on RSI the trend is up.
2. The 9 period on price is below the 45 period on price, and The 9 period on RSI is below the 45 period on RSI the trend is down.
3. The 9 period on price is above the 45 period on price, and The 9 period on RSI is below the 45 period on RSI the trend is sideways to up.
4. The 9 period on price is below the 45 period on price, and The 9 period on RSI is above the 45 period on RSI the trend is sideways to down.
Since the RSI is more volatile than the price, the 9 period simple moving average (SMA) on RSI will cross its respective 45 period weighted moving average (WMA) before the 9 period (SMA) on price will cross its
respective 45 period moving average. I place more emphasis on the moving averages based on price than those based on RSI. Staying aware of what the moving averages are doing will help you to stay focused on
the overall trend. When I am talking to another trader, I will often say that the moving average on price is positive.
This implies that the short term, 9 period SMA is, above the longer term, 45 WMA. The largest moves will frequently come when both moving averages are moving in the same direction. One more thought on
moving averages. You will find the moving average 45 WMA will prove to be support or resistance on both price and RSI. For example, you will often see a bullish market retrace to its respective 45 period
moving average (price and/or RSI). When this is observed it is another sign of what the trend actually is.
On the indicator:
1. is represented in Green Color
2. is represented in Red Color
3. is represented in Light-Green-Grey
4. is represented in Light-Pink-Grey
1. + Overbought (RSI Above 80) is represented in Acqua
2. + Oversold (RSI Below 20) is represented in Purple
1. + RSI Turned Bearish (RSI Below 50) is represented in Orange
2. + RSI Turned Bullish (RSI Above 50) is represented in Blue
In Addition a counter is displayed about the positives or negatives timeframes and an average line is computed across timeframes with green / red color comparison.
Timeframes are specified in the indicator panel and are the following:
- Weekly
- Daily
- 12h
- 4h
- 2h
- 1h
- 30 min
Enjoy,
CryptoStatistical
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