Parts — this name came to my mind thanks to an idea described by B. Williams in his Trading Chaos. As we all know a bar is represented by four price values: High price, Low price, Open price, Close price. Open and Close prices are always between High and Low prices, but on different levels.
According to B. Williams:
- Open — informs us about location of the point of balance between buyers and sellers at the beginning of trades.
- High — the point where power of bulls is exhausted and/or bears are strong enough to stop the growth.
- Low — the lowest price. Shows the exact price where bears breathed their last and bulls annihilated their movement strength in the downward direction.
- Close — informs us about location of an essential strength balance point at the end of the period. If the period has longer time frames (day, week, month), the close price will tell us the balance point suitable for traders to leave the price over a night, weekend, etc.
The author suggests us to divide a bar into three parts (that is from where the name derives) to systematize possible variants of movement models. I omit description of models as they are covered in the book.
But the Parts indicator has two operation modes. The first mode: the bar is divided into three zones. Every zone has a certain color. The second mode: the bar is divided into five zones which also have different colors. The main difference of this mode lies in the fact that borders of these zones correspond to some Fibonacci levels, namely 23.6%; 38.2%; 61.8%; 76%.
- count_bars — number of bars necessary to form zones
- timeframes — time frame for forming zones Time frame specified in settings should exceed the working one
- fibo_parts — switch to another operational mode false - the first operational mode; true - the second operational mode
- top — top zone color
- middle — middle zone color
- bottom — bottom zone color
- transitional — color of transitional zones
P.S. You can use models specified in Trading Chaos in any operational mode of the indicator.