Wave Pendulum Trend [QuantraSystems]

2024년 2월 22일

Wave Pendulum Trend

Introduction
The Wave Pendulum Trend (𝓟𝓮𝓷𝓭𝓾𝓵𝓾𝓶 𝓣𝓻𝓮𝓷𝓭) extrapolates market trends using physical principles derived from waves and pendulums. This indicator is a bespoke build, and its performance and behavior cannot be compared to existing indicators.
It is designed for trend following but is also effective for identifying mean reversions, momentum strength, and shows range-bound market periods within the dynamic bands.

In order to ascertain a smooth yet rapid trend direction of the market, the 𝓟𝓮𝓷𝓭𝓾𝓵𝓾𝓶 𝓣𝓻𝓮𝓷𝓭 combines several factors. A bespoke set of functions captures the momentum of price movements and dynamically weighs it over time. The indicator then extrapolates acceleration from the change in delta of price movements.



Legend
With bar coloring enabled, the price section mirrors current trend conditions. Please keep this feature disabled if you intend to use multiple indicators to avoid confusion.
The 𝓟𝓮𝓷𝓭𝓾𝓵𝓾𝓶 𝓣𝓻𝓮𝓷𝓭 presents extensive market insights. The purple and green bands around the oscillator signal the selected standard deviation (default σ = 2), for the trader to calculate how common the trending movements are in relation to the selected asset’s history.

The inner, dynamic thresholds, indicated by the blue “Range-bound market” label in the graphic above, border the area that signals a ranging market if both 𝓐𝓬𝓬𝓮𝓵𝓮𝓻𝓪𝓽𝓲𝓸𝓷 and 𝓜𝓸𝓶𝓮𝓷𝓽𝓾𝓶 signals remain inside. If either line exceeds these thresholds, care is advised as a shift in market behavior is underway.

“Trend strength” in the graphic provides a good estimate for the trending movements strength.
If the signal lines exceed the set standard deviation in non-classic mode, a reversal is very likely.



Case Study
As shown in the above case study we see two profitable swing trades on the 4H chart of Ethereum. Please note the display variant here is set to “Heikin-Ashi”.
We always recommend using a multitude of indicators to attain multiple signals on the likelihood of opening the correct position. However, this standalone scenario serves as an example on how the 𝓟𝓮𝓷𝓭𝓾𝓵𝓾𝓶 𝓣𝓻𝓮𝓷𝓭 added two profitable swing trades.

The first short trade was opened after the 𝓐𝓬𝓬𝓮𝓵𝓮𝓻𝓪𝓽𝓲𝓸𝓷 and 𝓜𝓸𝓶𝓮𝓷𝓽𝓾𝓶 reversed after crossing the threshold of standard deviation. This trade offered a late entry only, these two factors were followed late by the third signal in this case – the trend reversal. Such a trade would require additional indicators to signal at the same time, so the trader can get more confirmations. The trade was closed after 6D with an 8% gain on a 1x short position.

The second trade is a long position that enters in the same manner. The trader takes the reversal beyond the select standard deviation as a likely entry. After 7D a triple confirmation was received, as indicated by the triangle, that a reversal or at least a plateau is extremely likely. The trade was closed after 7D with a 17.23% gain on a 1x long position.


Recommended Settings

Trend Following / Investing (1D chart)
Please use the default settings!

Swing Trading (4H chart)
Wave MA - Type: TEMA
Wave MA – Length: 30
Display Variant: Heikin-Ashi
Bar Coloring: Off
Choose Mode for Coloring: Signal


Notes
Quantra Standard Value Contents:
The Heikin-Ashi (HA) candle visualization smoothes out the signal line to provide more informative insights into momentum and trends. This allows earlier entries and exits by observing the indicator values transformed by the HA.

Various visualization options are available to adjust the indicator to the user’s preference: Aside from HA, a classic line, or a hybrid of both.

A special feature of Quantra’s indicators is that they are probabilistically built - therefore they work well as confluence and can easily be stacked to increase signal accuracy.

To add to Quantra's indicators’ utility we have added the option to change the price bars colors based on different signals:

1. Settings: TEMA and DEMA length settings should be longer compared to other Moving Averages (MAs). Due to its complex calculations, the indicator requires a larger amount of historical data for accurate computation.
   
2. Sensitivity to Divergences: The Wave Pendulum Trend is particularly sensitive to divergences, making it a useful tool in spotting potential trend reversals or continuations.
   
3. Trend Following and Reversions: While it is primarily used for trend following, it also excels in identifying market reversions.
   
4. Momentum and Acceleration: The interaction between momentum and acceleration is a key feature of this indicator.
   
5. Visualization: The indicator offers various visualization options, including bar coloring based on HA Candles and extremes and trends. It also introduces a novel approach to visualizing the oscillator in the "Classic" mode and provides an adjustable Standard Deviation (SD) measure for reversal signals in non-classic modes.
   

Choose Mode for Coloring

• Trend Following (Indicator above mid line counts as uptrend, below is downtrend)
  
• Extremes (Everything beyond the SD bands is highlighted to signal mean reversion)
  
• Candles (Color of HA candles as barcolor)
  
• Reversions (Only for HA) (Reversion Signals via the triangles if HA candles change trend while beyond the SD bands, high probability entries/exits)
  

Methodology
The methodology behind the Wave Pendulum Trend is inspired by wave and pendulum theories to extrapolate market moves. By calculating the momentum and its acceleration from price data, it provides a nuanced view of the market trend.

1. Traders should observe the color coding, which reflects the interplay between momentum, acceleration, and set thresholds for acceleration. The Signal Mode is particularly useful for quickly identifying trend, momentum, and acceleration exhaustions.
   
2. Additionally, the indicator can help filter out ranges with insufficient momentum acceleration. Traders are encouraged to experiment with this mode and adjust the threshold settings to suit their strategies.
   

2024년 3월 14일

릴리즈 노트

Added 'Dynamic' capabilities.
Added 'Compressed Signal Mode'.

2024년 6월 12일

릴리즈 노트

Added "Volatility Proxy"
- A histogram based upon the width of the momentum HA candles. Includes the "Average Volatility" moving average in order to classify low volatility periods.

2024년 10월 15일

릴리즈 노트

• Cleaned up input menu for more uniform structure.
  
• Added signal table.
  

1월 7일

릴리즈 노트

- Alert restructuring

2월 7일

릴리즈 노트

- Added invisible output for alert script building