Quantitative Qualitative Estimation QQE

The Quantitative Qualitative Estimation (QQE) indicator provides a smoothed momentum-based analysis tool that identifies trend direction and potential reversals by combining a smoothed Relative Strength Index (RSI) with volatility-based trailing stop lines.

Usage

The Usage section describes how the script can be used to identify market trends and trade entries. Traders typically use the indicator in the following ways:

• Trend Identification: The 50-level acts as a primary trend filter. Values above 50 indicate an ascending trend, while values below 50 indicate a descending trend. Additionally, a range between 40 and 60 can be used to identify sideways or non-trending markets.
• Crossover Signals: The primary trade signals are generated when the QQE Fast line (smoothed RSI) crosses the QQE Slow line (the trailing stop).
  • Bullish Signal: Occurs when the QQE Fast line crosses above the QQE Slow line, particularly when this happens below the 50 level.
  • Bearish Signal: Occurs when the QQE Fast line crosses below the QQE Slow line, particularly when this happens above the 50 level.
• Momentum Shifts: Crossing the 50-level midline can also serve as a standalone signal for momentum shifts in the underlying asset.

Details

The Quantitative Qualitative Estimation (QQE) serves as a more refined version of the standard RSI. While the RSI can be susceptible to market noise and short-term volatility, the QQE applies exponential smoothing to the RSI values to create the "Fast" line.

To determine the "Slow" line (trailing stop), the script calculates a smoothed Average True Range (ATR) of the smoothed RSI. This volatility-based offset is then used to create trailing levels that adjust based on market conditions. Specifically, the script utilizes a multiplier (4.236) applied to the smoothed RSI's ATR to determine the distance of the trailing stop. This construction allows the QQE to maintain trend directionality while filtering out minor price fluctuations that might otherwise trigger premature exits in a standard RSI setup.

Settings

• Source: Determines the price data used for the RSI calculation (default is Close).
• RSI Length: Sets the period for the initial Relative Strength Index calculation.
• SF RSI Smoothing Factor: Defines the smoothing period applied to the RSI to create the QQE Fast line.
• Show Crossing Signals?: Toggles the visibility of "Buy" and "Sell" labels on the chart whenever the Fast and Slow lines cross.
• Highlighter On/Off?: Toggles the background shading between the Fast and Slow lines to visually represent the current trend state.

FAQ

How do I interpret the QQE Fast and Slow lines? The Fast line represents the smoothed RSI momentum, while the Slow line represents a volatility-based trailing stop. When the Fast line is above the Slow line, the trend is considered bullish; when below, it is considered bearish.

Can the QQE trigger false signals? Yes, because the QQE is fundamentally an RSI-based oscillator, it is susceptible to false signals during periods of strong market divergence or extreme volatility where price action moves contrary to momentum.

How can I access this indicator? You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.