Time Divergence - TDV

The Time Divergence - TDV indicator provides a unique perspective on asset strength by calculating the rate of price change relative to time, helping traders identify momentum shifts and potential trend reversals.

Usage

The Usage section describes how the script can be used to analyze market momentum. By normalizing price movement over a specific time period, the indicator allows for the identification of divergences between price action and the "time-adjusted" strength of an impulse.

Traders can use the TDV in the following ways:

• Divergence Analysis: Look for cases where price makes a higher high but the TDV makes a lower high, suggesting a loss in momentum.
• Mean Reversion: Utilizing the integrated Bollinger Bands, traders can identify overextended moves when the TDV line crosses outside the bands. A cross back inside the bands may signal a potential entry point.
• Trend Confirmation: When the TDV is consistently above the zero line, it indicates positive momentum, whereas values below zero suggest negative momentum.

Details

The core logic of the Time Divergence indicator is based on the relationship between price distance and time. Specifically, it calculates the change in price over a user-defined period and divides that change by the period itself. This result effectively represents the "velocity" of the price movement.

To refine the output, the script includes a Finite Impulse Response (FIR) filter option to smooth the source price. Additionally, Bollinger Bands are applied to the TDV output to provide dynamic thresholds for volatility and momentum extremes.

Settings

• Length: Sets the period over which the price change is calculated.
• Enable Smoother: When checked, applies an FIR filter to the source price to reduce noise.
• Bollinger Smoother: Enables the calculation and display of Bollinger Bands on the TDV line.
• Bollinger Bands SMA Period Length: Determines the lookback period for the Bollinger Bands' basis (EMA).
• Bollinger Bands Standard Deviation: Adjusts the width of the bands to control sensitivity to volatility.

FAQ

How do I interpret the zero line in TDV?

The zero line represents a neutral state where there has been no net change in price over the specified period. Values above zero indicate bullish momentum, while values below zero indicate bearish momentum.

What is the FIR filter used for?

The FIR filter is an optional smoothing mechanism that helps remove high-frequency noise from the price data before the TDV is calculated, leading to a smoother indicator line.

How can I access the Time Divergence - TDV?

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