Indicators: Congestion index

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Congestion index:

A description from a Markos Katsanos book (Intermarket Trading Strategies) :

...

The age-old problem for many trading systems is their inability to determine if a trending or trading range market is at hand. Trend-following indicators, such as the MACD or moving averages, tend to be whipsawed as markets enter a non-trending congestion phase. On the other hand, oscillators (which work well during trading range markets) are often too early to buy or sell in a trending market. Thus, identifying the market phase and selecting the appropriate indicators is critical to a system's success. The Congestion Index attempts to identify the market's character by dividing the actual percentage that the market has changed in the past x days by the extreme range.

...

Unlike similar indicators, like the vertical horizontal filter (VHF) or Wilder's ADX, the Congestion Index is directional for the following reasons:

  • It is self-contained in the sense that it eliminates the need for a second indicator to identify the trend direction.
  • It is better in identifying trend reversals.
  • It provides more accurate readings in cases of temporary pullbacks.
  • The chart space is less congested.

Author: Mladen Rakic

 

Mladen,


this  interpretation is correct ?

+20 or -20 : trend market

between +20 and -20: sideway market

 

Mladen,

Is there a MQL4-compatible version of the Congestion Index indicator?

 
please make this available for MT4 as well, thanks
 
Very good. I'm using succesfully in a EA
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