Micro E-mini Nasdaq-100 Index Futures (Mar 2022)CME
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This script displays the following indicators in one pane to quickly determine several important factors regarding price action. It allows the user to quickly see all of most important factors surrounding price action in one pane with one quick glance. This should be incredibly helpful and allow things like double divergence and trend confirmation to be spotted much more quickly. I personally use the data in this indicator to replace four separate indicators and it has brought my win rate and profit factor significantly higher. I hadn't seen any place where all of the best J. Welles Wilder indicators such as RSI, Parabolic SAR, and DMI/ADX were brought into one easy to use interface. This is my attempt at fixing that gap. For a much deeper understanding of how to use these indicators, I recommend reading New Concepts in Technical Trading Systems written by J. Welles Wilder.
Momentum via RSI (Relative Strength Index)
Volume via MFI (Money Flow Index)
Volatility via DMI/ADX (Direction Movement Index/Average Directional Index)
Trend via Parabolic SAR (Parabolic Stop and Reverse)
It is worth noting that DMI/ADX and Parabolic SAR can both help determine trend strength and volatility.
The Volatility mechanism is measured by DMI and ADX and displayed at the top of the pane using circles. The top, tiny circles reflect if show if positive DI or negative DI has a higher value. The small circles directly underneath indicate whether or not the ADX is above 20 (configurable, some may choose to increase this to 25 or even 30).
The Momentum mechanism is shown as standard RSI with the default being a white line and default period of 14, which is all configurable.
The Volume mechanism is shown as standard MFI with the default being a fuchsia line and default period of 14, which is also configurable.
The momentum and volume oscillators should be used in conjunction to help spot whether the trend is strong or weak using divergences and the middle, overbought, and oversold levels. These levels are also configurable.
The Trend mechanism is measured by Parabolic SAR and displayed at the bottom of the pane using diamonds. The default is red diamonds when in a bear trend, green when in an uptrend which is configurable. When price is above the Parabolic SAR, it is considered to be an uptrend. When price is below the Parabolic SAR, it is considered to be a downtrend. The way price is measured is also configurable (i.e. open, close, ohlc4, hlc3, etc.). When price crossed above or below the Parabolic SAR, the diamonds will change colors.
All the indicators displayed should be used in a well rounded strategy. For instance, I only trade when ADX is above 20 and rarely trade against the trend shown via PSAR. When trend shifts and divergences helped indicate a trend shift would occur using the RSI and MFI, it can be a great spot to take an entry. RSI/MFI can also confirm the trend is strong when they are not showing divergences and inline with price action. All of this data should be used in conjunction with good fundamental data and technical levels. Divergences with RSI and MFI on double tops or bottoms can also be incredibly powerful. There is no right or wrong way to use all the data displayed in this indicator, however using all four pillars of trading (Momentum, Volume, Trend, Volatility) will help ensure only the best trades are taken.
nice work and interesting approach to combining visuals in a usable way - thanks for sharing with the community..
Erebor_GIT
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Gracias!
dratzlogic
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This is a great approach--and I'm enjoying putting it into use. It's helping me become a more patient trader, as opposed to jumping in/out too quickly in the market. Do you have any more details on how you use DMI in conjunction with SAR, or are you only using DMI for the ADX signal? Also trying to find some good examples of divergence with the RSI/MFI. Outstanding work and thank you.
kfatkin
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@dratzlogic, I personally am just using it DMI for the ADX signal to avoid sideways markets, however if you find alternative ways to make use of the DMI+/- signals, please let me know. In the chart screenshot above, at 3/15/22 03:13 and 3/15/22 05:07 you'll see a good example of double divergence on MFI and RSI, which I have found to be some of the best setups.
jack-tamara
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Hi,Good work,please if possible add MACD to complete as an all in one indicator.
kfatkin
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@jack-tamara, Unfortunately, I couldn't find it into the same scale as RSI/MFI, however RSI and MACD are somewhat redundant since they both use algorithms to derive momentum from price action.
kfatkin
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If anyone has any questions or feedback, I'm happy to help. I will make sure I check on these periodically. I didn't mention this in the description, however I have had a tremendous amount of success using these indicators on the Renko 1m chart using ATR 14 for Renko when trading stocks/futures/options. Looking for divergences in RSI/MFI then playing the Parabolic SAR break on a Renko chart (while always taking key levels into account formulated from price action and Open Interest) has led to a great win rate. I will sometimes take trades even if ADX is below 20, but will exit quickly if it does not shift after a certain amount of time.
CMFtest
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@kfatkin, as i am price action trader and timeless chart guy, rly like your approach, suggestion add bacground vertical lines as signals when all buy/sell side aligns. after quick glance and test looks impresive.
kfatkin
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@CMFtest, I like that idea, I'll have to figure out how to identify divergences reliably in an automatic way to help create those signals since divergence is just as useful as trend when it comes to these oscillators, and both work far better than just referencing overbought/oversold conditions in my testing.
ManuVoyeger
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@kfatkin, am a new trader ... i like this indicator but when to buy and when to sell , i can figure this out ... please help.