The principle of drawing the indicator lines.
The Profit Trade indicator is a very effective development of the well-known Donchian channel indicator for trading. The upper (BlueViolet color) Dup and lower (IndianRed) Ddn lines of the indicator are plotted in the same way as in the Donchian channel, based on the highest (maximum of High) and lowest (minimum of Low) prices for the previous n1=20 periods. The average line (Gold) Dm is plotted in the same way as in the Donchian channel indicator, as the average of the two above-mentioned lines. The (Blue) Pup line, located just below the top one, is based on the maximum Low for the previous n1 periods, and the line (Red) Pdn, located immediately above the lower one, is constructed similarly on the basis of the High minimum. In addition, based on an algorithm similar to the moving median of the average price (High Low)/2, but with a smaller period n2=3, a signal line (WhiteSmoke) Ps is constructed.
Advantages of the indicator.
The indicator shows the current state of the market in a visual way that covers all the characteristic price scales, the filtering used in it is extremely robust and it does not redraw. The indicator settings are extremely simple.
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The indicator shows the current state of the market in a visual way that covers all the characteristic price scales, the filtering used in it is extremely robust and it does not redraw. The indicator settings are extremely simple.
Trade using the Profit Trade indicator.
The upper Dup and lower Ddn lines cover all the current price fluctuations for the period n1 and outline a large-scale channel that the price breaks through when the market state changes. If an uptrend occurs, the price will almost always fit into the narrow channel formed by the Dup and Pup lines, but if a downtrend occurs, the price is clamped into a narrow channel by the Ddn and Pdn lines. in the middle of such ascending or descending channels. If the Ps signal line crosses the Pup line from top to bottom in the ascending channel or crosses the Pdn line from bottom to top in the descending channel, this indicates a change in the direction of the corresponding trend. Further crossing of the midline Dm by the signal line Ps confirms the emerging trend. An earlier signal to change the direction of the trend is a break in the Ps signal line, when it turns from a direction parallel to the horizontal one to be directed against the established trend. If the signal line is broken in the direction of the trend from the direction parallel to the horizontal one, then this trend will continue. If the trend is upward and starts at the exit of the lower channel, limited by the lines D dn and Pdn, thenStopLoss buy positions should be placed on the line D dn. For a downtrend starting from the Dup and Pup channels , StopLoss sell positions should be placed on the Dup line.
The intersection of the Ps signal line from top to bottom of the Pup line in the ascending channel or the intersection of the Pdn line from bottom to top in the descending channel may also indicate the occurrence of a pullback on the corresponding trend. Profitable positions in this case need to be closed; and wait for Ps to cross the Pup line from the bottom up in the ascending channel or cross the Pdn line from the top down in the descending channel, which will indicate the end of the rollback. After that, we open positions on the trend again. In this case, StopLoss is determined in the same way as previously described, but on a smaller timeframe.
The flat is identified by the long horizontal lines of the indicator, which are comparable in length to the trend areas. Opening positions on the flat is undesirable.
The flat is identified by the long horizontal lines of the indicator, which are comparable in length to the trend areas. Opening positions on the flat is undesirable.
The analysis of the state of the market should begin with the consideration of a large timeframe, which determines the direction of the current trend. If it is flat, it is better not to open positions. We open positions according to the trend on a smaller timeframe. If there is a pullback, then it is also undesirable to open the corresponding positions against the trend, because at the time of the pullback, we do not know its duration, which may be small.
Indicator settings.
- The main averaging period – The main averaging period. Value: any integer (20 by default).
- The signal line averaging period – The averaging period for the signal line. Value: any integer (3 by default).
- Line thickness – The thickness of the indicator lines. Meaning: any positive integer (1 by default).
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