Trend Following System

The Trend Following System indicator is a multi-layered moving average tool designed to identify trend reversals and momentum shifts through dynamic gradient coloring and predictive projection.

Usage

The system utilizes three primary Exponential Moving Averages (EMAs)—Short, Key, and Long—to determine the market's direction. Traders can observe the relationship between these averages to gauge trend strength.

A central feature is the gradient background fill between the EMAs. This color-coded area transitions based on the slope of the Key EMA relative to its own internal average. This helps in identifying early signs of trend exhaustion or reversal before price action fully confirms the move. Additionally, the tool projects the moving averages five steps forward based on their current slope, providing a visual guide for potential future support or resistance levels.

Details

The script executes a specialized gradient algorithm that tracks the advancement or declination of the trend. When the Key EMA is above its baseline and rising, it transitions toward the Bull Color; if it begins to flatten or fall while still above the baseline, the gradient shifts back toward the Neutral Color.

The "Prediction" feature uses the current price and historical average values to estimate where the EMAs will sit in future bars if the current slope persists. This is visually represented by small crosses following the end of the line plots.

Settings

• Key EMA: Sets the length for the primary trend-defining EMA (default is 55).
• Long term EMA: Sets the length for the long-term trend baseline (default is 100).
• Short term EMA: Sets the length for the short-term momentum EMA (default is 21).
• Show Bands: Toggles the visibility of outer price bands based on wide SMAs.
• Show cycle top: Enables a background highlight when specific long-term SMA conditions are met.
• Show Long Ema: Toggles the visibility of the 100-period EMA.
• Bear/Bull/Neutral Color: Customizes the colors used for trend visualization.
• Max Gradient Steps: Adjusts the sensitivity and smoothness of the color transitions.

FAQ

How do I use the projected crosses at the end of the lines?

The crosses represent a mathematical projection of the EMA values for the next 5 bars. They serve as a visual guide for where the trend is heading based on current momentum.

What does it mean when the background color changes?

The gradient reflects the slope of the trend. A strong solid color indicates high momentum, while a fading color toward neutral suggests the trend may be weakening or consolidating.

How can I access this tool?

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