Michael

19 במרץ 2020

Indicator «Michael»



Class: trend indicator
Trading type: intraday trading / mid-term trading
Time frame: 15 min -1 day
Purpose: trend trading, reversal points identification,
Level of aggressiveness: standard

Indicator “Michael” indicator is designed to identify a local trend and generate signals for trading in the direction of the current trend. It can be used to trade at time intervals from 15 minutes to 1 day. The frequency of the signals depends on the selected time interval, as well as the indicator settings. For example, on an interval of 15 minutes and standard settings, the number of trades will be about 5-10 per day.

The indicator combines the advantages of average analysis, as well as regression analysis, which allow you to decrease unnecessary noise in price dynamics and concentrate on the overall picture of price movement.

The main feature of the Michael indicator is an attempt to partially offset the main drawback of the analysis of averages - the delay of signals. Averages, by their nature, show what was, and not what will be. As a result, often the predicative abilities of this method of technical analysis are questioned. In order to improve the quality of the signals, auto-regression model is used in the indicator. As the result “Michael” shows not what was, but what will be. That is, the delayed signals of the moving averages are balanced by the auto-regression model. Overall, a trader gets a picture that optimally describes the current reality.

In “Michael”, two autoregressive models with different lags are used, which allows monitoring not only general, but also current moods in the market.

Indicator “Michael” checks for the presence of price deviations from equilibrium values. If such deviations are detected, the indicator generates signals in the direction of the local trend.

Structure of indicator

The indicator consists of the following elements:

- trend line (center line) - shows the current trend in the market using a special color display. Red is a downward trend, blue is an upward trend, green is a flat;

- volatility lines - black channel lines that monitor the level of volatility in the market. Their divergence is a signal of an increase in market volatility. Convergence - decrease in volatility;

- stop lines - show the calculated value of the stop / profit value for the position in case of signal generation at a specific moment in time.

Parameters of the indicator

To configure the indicator, the following parameters are provided:

- periodFAR (default value is 13) - period for determining a short-term trend. The higher it is, the more conservative will be the perception of an indicator of a trend.

- periodSAR (default value is 34) - period for determining the current trend. Responsible for the level of trade aggressiveness. The lower the value of this parameter, the more signals the indicator will generate and vice versa.

- Stop_period (default value is 21) - period for calculating stop lines.

- Stop_agressor (default value is 1) - the parameter responsible for the aggressiveness of stop losses. The higher it is, the wider the lines of stops are.

Rules of trading

The main purpose of the indicator is to determine the prevailing market sentiments: bullish (the trend line is colored blue), bearish (the trend line is colored red) or neutral (the trend line is colored green). Accordingly, with dominance in the bull market, only buy transactions are allowed, and in a bear market, sells are allowed.

Signals to enter positions are displayed on the chart. Stops are set below (for purchases) or above (for sales) the red lines.