The WillSpread indicator is designed for working on related markets. It has been suggested by the famous Larry Williams in his book "Long-term secrets to short-term trading".
Example of related instruments: futures on the RTS index and Brent oil prices, or futures for ruble versus dollar pair and oil prices.
In essence, the indicator determines the "overheat" of one market related to the other. If the divergence of two assets reaches the extreme values, and then starts slowing down, a signal for opening a position appears. The ease of using this indicator lies in that there is no need to monitor 2 price charts.
The indicator is calculated in 2 steps:
- Step 1. Calculate the spread between two instruments:
Spread = Instrument for trading (Close) / Related instrument (Close) * 100,
Instrument for trading (Close) - Close price of the instrument, where trades are opened, for example, futures on the RTS index
Related instrument (Close) - price of the related instrument, for example, futures on Brent oil
- Step 2. Average the resulting value with different periods and calculate the indicator
WillSpread = EMA(Spread, 20) - EMA(Spread, 5)
EMA(Spread, 20) - averaging of the Spread using exponential moving average with a period of 20
EMA(Spread, 5) - averaging of the Spread using exponential moving average with a period of 5
Standard use of the WillSpread involves opening long positions when the signal level 0 is crossed from below and opening short positions when the 0 level is broken from above.
The indicator should be run in the window of the symbol to be traded. At the same time, the window of the related symbol should also be open.
Indicator Input Parameters
- symbol_trade - instrument for trading, default is "Si Splice" - splice of the futures on USDRUB pair
- name_add_symb - related instrument, default is "BR Splice" - splice of futures on Brent oil
- fast_ma - period of the fast moving average, default is 5
- slow_ma - period of the slow moving average, default is 20