Derivative of Price Acceleration in Relations to Time Period

2023년 12월 17일

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Most of the time (about 75%) financial instruments such as stocks and crypto trend sideways, and about 25% of the time they breakout and and trend either up or down. The following pine script attempts to find a price where the market is sideways and is about to go up (long only).

How?
The pine script entails several factors to go long (which include):

1. EMAs of 3 different lengths to ensure the overall trend is up.
2. This pine script emphasizes price acceleration. Price acceleration demonstrates the strength or weakness in price movements, and significant changes might indicate the beginning or end of a trend. If the price continues to accelerate, price should go up, but when price decelerates, it might signify the ending of trend and reversal of trend in opposite direction.
3.The change in acceleration is also calculated. In physics terms, it is known as “jerk”. It tries to anticipate changes in momentum before they fully develop by recognizing when the acceleration starts to increase or decrease.
4. The code models relationship between "jerk" and a specific "period" of time to determine the trend of "jerk" over a specific period. If the slope is upward, it may indicate increasing upward momentum, and conversely, a downward slope could indicate increasing downward momentum.

How to read the indicator:
When “jerk” is above 0, it signifies an upward change in acceleration (This is shown with a red line)


Relationship between “jerk” and "period" is shown as a bar graph that oscillates around the 0 mark. The bars come in 4 colors:
Red bars: signify a downward “jerk” motion, signifying a downward momentum.
Yellow bars: signify the weakening of downward “jerk” motion, meaning downward momentum is shifting and the strength will likely shift to opposite direction (upward)
Aqua bars: the “jerk” motion is in upward motion, signifying an upward momentum.
Blue bars: “jerk” motion is losing its upward momentum, and most likely will reverse to down side.


-When EMAs are positioned positively;
-When “jerk” is above 0;
-When relationship between jerk and "period" is starting to gain strength (bars are yellow)

All conditions are satisfied, and a green square is drawn at the bottom, signaling to go long on the next bar.



*PRICE TARGETS*
The script includes price target which suggest where profits should be taken.
These can be changed in the "Inputs" options section under "Keltner Channel Time Frame" and "Keltner Channel Time Frame 2"

Please note :
-The targets are just an estimate, and do not guarantee that prices will definitely reach them. At times, the prices overshoot targets (a good thing), and sometime they undershoot the targets.
-Use the time frame options that are next greater to the ones you are trading.
For Example:
x If you trade on 3hr time frame, it is recommended to set "Keltner Channel Time
Frame" to 6hr and 8hr targets.
x If you trade on 1hr time frame, it is recommended to set "Keltner Channel Time
Frame" to 1hr and 3hr.
Why?
x If you put the time frame that is too much different from the one you are trading,
your target will be unachievable, and it might not get there.

How are the targets calculated?
-Targets are set x standard deviations above an EMA.
-Depending what time frame you choose to have your Keltner Channel Targets, that is the time frame which the standard deviation of EMA is calculated from.
-It is recommended to put your take profit orders just below the drawn lines
-When the green square is drawn at the bottom, that is when Keltner Channel Targets are drawn automatically


**Stop Loss**
-When entry green square is drawn, stop loss is automatically generated.
-It is recommended to put an order just below the stop loss line drawn, as it sometimes touched before going back up.
-IT IS RECOMMENDED TO BE SELECTIVE AND TAKE ONLY TRADES WHERE POTENTIAL GAIN IS GREATER THAN THE RISK (IDEALLY PROFIT SHOULD BE 2X YOUR POTENTIAL RISK OR GREATER.



++How is the Stop Calculated++
-Stop is calculated x multiples of atr below an EMA.

Final Note:
-All the parts of the code are customizable in the option. All you need to do is to click the little gear that appears as you mouse over the indicator in the upper left corner.

VERY IMPORTANT
Please remember that no indicator or script can guarantee success, and its effectiveness may change according to market conditions, as past results do not indicate future performance. Always consider your risk tolerance and investment goals before trading. Always backtest your trades to ensure that your trading is profitable before trading live.