Energy line is calculated similar to kinetic energy in physics: E = (mv^2)/2. Tick volumes (money stock) are used as mass, while price rate of change (ROC) is used as velocity.
Energy direction (positive or negative) is defined by ROC direction.
Chaikin Volatility (CHV) indicator is additionally used. Since the volatility starts increasing before the price actually moves, CHV notifies of the increased market activity in advance. Calculations result in the energy release, which usually occurs before a strong movement. When passing extreme points, energy line drops sharply to 0. In case of minor fluctuations or a steady trend, the energy level is also small (near 0).
The impulse line is calculated separately from the energy one. Calculation is based on the difference of three moving averages - ТЕМА(12), DEMA(34), MA(55). Weights that are equal in magnitude are assigned to them. The weights can be positive or negative depending on the averages' difference value and the energy line direction. The impulse line correlates with the energy one quite well smoothing its sharp fluctuations.
Position open/close moments:
- Entry is performed when Impulse line changes its direction to the opposite one after an extreme value is reached.
- Exit is performed when Energy line's extreme value is reached.
Recommended values of Period parameter on various time frames are as follows: M12 - 14; M15 - 12; M20 - 10; M30 - 8; H1 - 6. In other words, the bigger the time frame, the lesser the Period. The indicator has not been tested on the time frames bigger than H1.