Trend Strength Signals

The Trend Strength Signals indicator provides a comprehensive framework for identifying market trends and assessing their underlying momentum through visual signals and a dynamic strength gauge. It aims to help traders differentiate between trending and range-bound price action by utilizing volatility-based envelopes and a real-time visual assessment of trend intensity.

Usage

The tool can be utilized to identify the beginning of new trends and potential exhaustion points.

• Trend Detection: Color-coded labels appear on the chart when the trend shifts. A bullish signal (upward triangle) is triggered when price breaks above the upper volatility band, while a bearish signal (downward triangle) occurs when price breaks below the lower band.
• Strength Gauge: A table located on the right side of the chart provides a gradient-based visualization of current price momentum. The higher the pointer on the gauge, the more intense the current move relative to historical volatility.
• Take Profit Signals: The indicator plots "X" marks on the chart when price reaches extended standard deviation levels, suggesting potential areas where the current trend might be overextended and ripe for a reversal or consolidation.
• Bar Coloring: Candles are dynamically colored based on their position relative to the volatility bands to provide immediate visual feedback on the current market state.

Details

The indicator is constructed using a Simple Moving Average (SMA) as a baseline and calculating standard deviation bands around it. Unlike standard Bollinger Bands, this tool utilizes specific logic to lock in trend states:

• Trend Logic: A trend is confirmed only when the price closes outside of the 1-standard deviation bands. Once a trend is established, it remains in that state until a cross occurs in the opposite direction, providing a more stable trend-following experience.
• Momentum Calculation: The strength gauge measures the distance between the price and the moving average, normalized against the highest distance observed over the last 200 bars. This allows the gauge to dynamically scale based on the recent volatility profile of the asset.

Settings

• Enable Cloud: Toggles the visibility of the volatility bands and the shaded area between them.
• Period: Adjusts the lookback period for the SMA and standard deviation calculations.
• Standard Deviation Multiplier for TP: Determines the distance of the Take Profit "X" signals from the baseline.
• Gauge Size: Controls the vertical height and granularity of the strength gauge table.
• Up Color / Down Color: Customizes the colors used for bullish and bearish signals and visual elements.

FAQ

How do I use the Take Profit signals?

The "X" marks represent price reaching the Standard Deviation Multiplier for TP setting. These are designed to highlight overextended conditions where the trend strength might be peaking.

Can I set alerts for trend changes?

Yes, the script includes alert conditions for bullish trend starts, bearish trend starts, and take profit triggers, which can be configured through the TradingView alerts menu.

How do I access Trend Strength Signals?

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