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Stoplight Trend Analysis

Moving averages work well in trending markets, and poorly when the market is in a flat. To identify the trend with moving averages, I have created the Stoplight Trend Analysis indicator, which shows the trend on the bars chart in different colors. When the market is bullish, the bars on the chart are colored in green, when the market is bearish, the bars acquire the red color. At a neutral market the bars on the chart retain the default color, but you can change this color in the chart properties.

The Stoplight Trend Analysis indicator is based on three moving averages, which differ in the specified period, but have a common plotting method. The following conditions are set in the indicator by default:

  • 1 moving average - Simple Moving Average, with a period of 5, based on the closing price
  • 2 moving average - Simple Moving Average, with a period of 15, based on the closing price
  • 3 moving average - Simple Moving Average, with a period of 30, based on the closing price

The market is considered bullish, when 1 moving average > 2 moving average and 1 moving average > 3 moving average. The market is considered bullish, when 1 moving average < 2 moving average and 1 moving average < 3 moving average. The indicator simplifies these conditions, by displaying them on the chart, and allowing not to clutter the chart with three moving averages. This indicator is useful as an additional tool in the analysis, for example, I combine it with graphical analysis and the Elliott Wave analysis.


The indicator parameters

  • Bull Bars - color of bars for bullish market
  • Bear Bars - color of bars for bearish market
  • MA_Method - plotting method of moving averages
  • Price_Method - calculation method of moving averages
  • Moving Average #1 - period of the 1st moving average
  • Moving Average #2 - period of the 2nd moving average
  • Moving Average #3 - period of the 3rd moving average
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