Momentum Pinball Indicator
Jun 19, 2019
The Momentum Pinball indicator tool identifies short-term mean-reversion setups by calculating a 3-period RSI of a 1-period Rate of Change (ROC) to pinpoint overextended price action.
Usage
The indicator is primarily used to identify "setups" rather than immediate entry signals. When the indicator identifies a setup, traders typically look for execution on the following trading session:
- Buy Setup: Occurs when the indicator falls below the oversold level (30). On the following day, traders may look to enter a long position if the price breaks above the high of the first hour of trading.
- Sell Setup: Occurs when the indicator rises above the overbought level (70). On the following day, traders may look to enter a short position if the price breaks below the low of the first hour of trading.
Traders often set stop-losses at the opposite side of the first hour's range. If the trade is profitable by the market close, the position can be closed or held overnight for an exit during the next morning's volatility.
Details
The Momentum Pinball logic is based on the concept that extreme short-term momentum shifts (measured by the ROC) tend to revert. By applying a Relative Strength Index (RSI) to the Rate of Change, the script filters out noise and focuses on rapid "pinball" movements between overbought and oversold states. The implementation uses a standard 1-period ROC and a 3-period RSI calculation to maintain high sensitivity to price changes.
Settings
- ROC Period: Determines the lookback period for the Rate of Change calculation. Default is 1.
- RSI Period: Sets the length of the Relative Strength Index applied to the ROC values. Default is 3.
FAQ
How do I use the Momentum Pinball indicator?
You look for triangle shapes on the chart indicating overbought or oversold conditions, then plan an entry based on the first hour's price action of the subsequent session.
What timeframes are best for this tool?
While originally designed for daily setups to be traded the next day, it can be applied to various timeframes where mean-reversion tendencies exist.
Where can I access this script?
You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.
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