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Buhalich Colored Bars

The Idea

The indicator colors the price chart in red and blue, when the price approaches to the market top or bottom. The system doesn't produce unexpected signals. The chart is painted gradually and you always know where the price is actually situated at the moment relative to potential pivot points. If price is far from both the market bottom and the top, bars are colored in white. Bars are not repainted.

The Indicator Algorithm

The indicator operation principle is the following:

  1. A baseline is selected. This can be a regression line or a moving average.
  2. Deviation from this price is determined.
  3. Then line's bend value is added to it.
  4. If the price deviates much from it's mean value, and there is a tendency to turn, we may suggest that it is the market top or bottom.

This strategy works well if time scale is properly selected. But when we see, for example, a bottom on one scale, it can be a top on the other one. That is why a large number of base lines with different periods are chosen in this indicator and calculation data for every line are added up. This is how the theory of probability works. When there is a strong deviation from the majority of lines, and the majority of lines have tendency to turn, there is actually a large probability of price turn. The closer to the bottom of the market, the color of the bar gets closer to blue. When approaching the top, the bars turn red.

Settings

  • BarsToCount - The number of bars counted in history. This parameter affects only the number of colored bars and doesn't affects their color.
  • UseRegression - Use the regression line as a base line.
  • UseMA - Use the moving average as the base line. The two previous functions can be used together, the results will be added. This will increase the accuracy.
  • DeviationFactor - deviation factor. This coefficient reflects the contribution of price deviation from base line in net result.
  • BendFactor - bend factor. This coefficient reflects the contribution of base line bend in net result.

Operation Principle

The indicator works on all currency pairs and timeframes. It determines zones of price turn perfectly well. This is a long-term system, but you can use it to filter short-term trades. Do not trade against the trend!

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