Discussing the article: "Automating Market Entropy Indicator: Trading System Based on Information Theory"
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Check out the new article: Automating Market Entropy Indicator: Trading System Based on Information Theory.
This article presents an EA that automates the previously introduced Market Entropy methodology. It computes fast and slow entropy, momentum, and compression states, validates signals, and executes orders with SL/TP and optional position reversal. The result is a practical, configurable tool that applies information-theoretic signals without manual interpretation.
The Market Entropy Expert Advisor updates entropy calculations on each market tick using bar-based price data. Each candle is classified as up, down, or flat, forming the basis for entropy computation. From this, the system derives fast and slow entropy values, calculates momentum, and detects compression and decompression zones. All analytical processes run in the background, while the trader interacts only with the resulting signals displayed on the chart.
A buy signal typically occurs when fast entropy crosses above slow entropy, supported by positive momentum and entropy levels that indicate non-chaotic conditions. In addition, buy opportunities may arise from compression breakouts, where entropy transitions from a compressed state into decompression with strengthening momentum. These signals are further validated by divergence thresholds, regime classification, and compression state transitions to improve reliability. When confirmed, the EA executes a buy position and plots a green upward arrow below the corresponding candle.
Author: Hlomohang John Borotho