[blackcat] L3 Automatic Trend Channels

Level: 3

Background

Trend channels, also sometimes called price channels or trading channels, are a popular tool in technical analysis used by investors to determine good places to buy or sell. Trend channels consist of at least two trend lines that connect the swing highs and the swing lows of a trending or a sideways moving market. It’s important to note that trend channels don’t have to be perfectly parallel lines, but more on that later!


Function

Unlike many other authors who are eager to draw automatic trend lines, I made a trade-off between trend lines based channels and moving averages. As a result, it is more clear to see the trend change and price positions with overbought and oversolder zones highlighted in fuchsia and yellow colors, respectively. Same to trend lines, there are 3 main types of trend channels.

• Ascending channel or Rising channel (higher highs and higher lows, which would break out sliver color trend channel and run into fuchsia color overbought band)
  
• Descending channel or Falling channel (lower highs and lower lows, which would break out sliver color trend channel and run into yellow color oversold band)
  
• Sideways or horizontal channel (ranging, which will keep oscillating within silver color trend channel)
  

Inputs

Algo Lookback (Smaller for Less Computing Power) --> This indicator is very computing-power consuming and if you failed to load it properly and try to input a smaller integer value here.
Algo Nested Period (Smaller for Faster Response) --> This indicator is very computing-power consuming and if you failed to load it properly and try to increase the number here.

Key Signal

Silver channel --> trend channel to identify sideways.
fuchsia band --> overbought band and sell after price cross under the fuchsia lines (Note, the second crossunder is more meaningful)
yellow band --> oversold band and buy after price break out and cross over the yellow lines (Note, the second crossover is more meaningful)

Remarks

This indicator algorithm is very computing-power consuming and it may fail to load in small time frame.

This is a Level 3 free but closed source indicator.

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