Market Sentiment IndicatorMarket Sentiment Indicator
Class : hybrid – trend oscillator
Trading type : any
Time frame : any
Purpose : trend detection, reverse points detection
Level of aggressiveness : any
Indicator «Market Sentiment Indicator» (MSI) is used to detect dominating market sentiments and to search for the points of market sentiments change.
Domination of bullish sentiments means that “buy” trades are preferable. In case of bearish sentiments “sell” trades should prevail. Also indicator “MSI” can detect neutral market sentiments (the absence of dominating tendency), which means the presence of flat in the price dynamics.
Entering the extreme zones means that current market sentiments may change soon. This may act as a reverse signal.
Summarizing «Market Sentiment Indicator» provides additional information for successful trading.
Structure of the indicator
Indicator consists of the following elements:
- Histogram of market sentiments – is presented with 3 color gammas: blue color (bullish sentiments are dominating), red color (bearish sentiments are dominating), red color (neutral sentiments are present in the market),
- Red zone – bullish extreme zone, warns that current upward trend is ready for correction. Entering this zone is a signal for partial profit fixation for long positions;
- Blue zone – bearish extreme zone, warns that current downward trend is ready for correction. Entering this zone is a signal for partial profit fixation for short positions.
Input parameters of the indicator
To set up the indicator a “MSI period” parameter is used. It shows how many previous periods are used to calculate the MSI. The bigger the period is the more conservative signals are and vice versa.
Rules of trading
The main purpose of this indicator is detection of prevailing market sentiments: bullish (blue color of histogram), bearish (red color of histogram) and neutral (green color of histogram).
Accordingly in case of bulls’ domination preference should be given to purchases, in the bear market – to sell trades. Neutral state of the market is a reason to trade with no any preferences.
Entering the extreme zones is a reason for partial profit fixation of positions opened in current tendency.
Exit from the extreme zones is a strong reversal signal.
Sentiment
Volatility BalanceThis "Volatility Balance" indicator measures volatility from a different perspective.
It plots both an upside (green) and downside (red) volatility rating as well as a histogram depicting either the difference between the two or the two combined.
First, it calculates the ratio of the candle body (open to close) in relation to the entire candle range (high - low). This is the "candle body size ratio".
Secondly, it calculates the "dominance ratio" of the upside volatility (close - low) or downside volatility (high - close), in relation to the entire candle range (high - low)
Thirdly, it then uses the above values to derive the upside and downside power.
The upside and downside powers are calculated by multiplying the "candle body size ratio" to the upside or downside "dominance ratio" and then to the entire candle range.
It then divides this value by the close of the candle to normalize the overall value. After which it then multiplies this final value by 100, to get a percentage value between 0 - 100%.
It then averages the upside or downside "power value", using a volume-weighted moving average with the averaging period initially set to 7 periods, but this can be altered in the format settings.
The volatility difference or volatility size is displayed as a histogram style behind the green and red upside and downside power lines (depending on which value the user chooses), via an option in the format settings.
The volatility difference is the upside minus the downside and the volatility size is the upside and downside added together.
In case the user wishes to see EACH candle's power value before it has been averaged with volume, there is an option in the format settings to show each candle's upside or downside "power". If this method is chosen, the histogram will be hidden. There are also various check boxes, in case the user wishes to hide any of the plotted values.
The volatility size can determine how much energy has been behind the change in price over the period measured.
The volatility difference can determine how much upwards or downward energy is present within the period measured, in other words, the possible direction.
The use of the candle body ratio helps to determine the balance between upwards and downwards energy. If it is small, then it implies that there is more of a balance between buyers and sellers and therefore less volatility, as the price hasn't moved as much than if the body of the candle was larger. Smaller values indicate that price may not move as much and therefore lock up your funds longer until price starts to move again.
The use of a volume-weighted moving average helps to give higher volume periods more significance towards a possible price shift.
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This indicator was originally inspired by the Profit Trailer Feeder add-on and it's volatility groupings.
If you don't already have the Profit Trailer Feeder add-on to the Profit Trailer software, and you have now decided to get it, please help me out and use my affiliate link below. It won't cost you any extra, but it helps keep the lights on, so I can create more of these indicators.
Kindest Regards
Created 2018 - by @Squiggles#8806
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Profit Trailer Feeder affiliate link: cryptoprofitbot.com
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I have been asked for a BTC_address so If you feel the urge to Donate
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SentimentSentiment is inversly related with price movement. When long positions make a peak, market has a high possibility to go down and when short positions are dominant, there may be a near-term bull market ringing the door bell.