Quantify [Entry Model] | Fractalyst

12. Dez.

What’s the indicator’s purpose and functionality?

Quantify is a machine learning entry model designed to help traders identify high-probability setups to refine their strategies.

➙ Simply pick your bias, select your entry timeframes, and let Quantify handle the rest for you.



Can the indicator be applied to any market approach/trading strategy?

Absolutely, all trading strategies share one fundamental element: Directional Bias

Once you’ve determined the market bias using your own personal approach, whether it’s through technical analysis or fundamental analysis, select the trend direction in the Quantify user inputs.



The algorithm will then adjust its calculations to provide optimal entry levels aligned with your chosen bias. This involves analyzing historical patterns to identify setups with the highest potential expected values, ensuring your setups are aligned with the selected direction.



Can the indicator be used for different timeframes or trading styles?
Yes, regardless of the timeframe you’d like to take your entries, the indicator adapts to your trading style.



Whether you’re a swing trader, scalper, or even a position trader, the algorithm dynamically evaluates market conditions across your chosen timeframe.

How can this indicator help me to refine my trading strategy?

1. Focus on Positive Expected Value
• The indicator evaluates every setup to ensure it has a positive expected value, helping you focus only on trades that statistically favor long-term profitability.



2. Adapt to Market Conditions
• By analyzing real-time market behavior and historical patterns, the algorithm adjusts its calculations to match current conditions, keeping your strategy relevant and adaptable.



3. Eliminate Emotional Bias
• With clear probabilities, expected values, and data-driven insights, the indicator removes guesswork and helps you avoid emotional decisions that can damage your edge.



4. Optimize Entry Levels
• The indicator identifies optimal entry levels based on your selected bias and timeframes, improving robustness in your trades.



5. Enhance Risk Management
• Using tools like the Kelly Criterion, the indicator suggests optimal position sizes and risk levels, ensuring that your strategy maintains consistency and discipline.



6. Avoid Overtrading
• By highlighting only high-potential setups, the indicator keeps you focused on quality over quantity, helping you refine your strategy and avoid unnecessary losses.



How can I get started to use the indicator for my entries?
1. Set Your Market Bias
• Determine whether the market trend is Bullish or Bearish using your own approach.
• Select the corresponding bias in the indicator’s user inputs to align it with your analysis.



2. Choose Your Entry Timeframes
• Specify the timeframes you want to focus on for trade entries.
• The indicator will dynamically analyze these timeframes to provide optimal setups.



3. Let the Algorithm Analyze
• Quantify evaluates historical data and real-time price action to calculate probabilities and expected values.
• It highlights setups with the highest potential based on your selected bias and timeframes.

4. Refine Your Entries
• Use the insights provided—entry levels, probabilities, and risk calculations—to align your trades with a math-driven edge.
• Avoid overtrading by focusing only on setups with positive expected value.

5. Adapt to Market Conditions
• The indicator continuously adapts to real-time market behavior, ensuring its recommendations stay relevant and precise as conditions change.

How does the indicator calculate the current range?

The indicator calculates the current range by analyzing swing points from the very first bar on your charts to the latest available bar it identifies external liquidity levels, also known as BSLQ (buy-side liquidity levels) and SSLQ (sell-side liquidity levels).

What's the purpose of these levels? What are the underlying calculations?

1. Understanding Swing highs and Swing Lows

Swing High: A Swing High is formed when there is a high with 2 lower highs to the left and right.

Swing Low: A Swing Low is formed when there is a low with 2 higher lows to the left and right.



2. Understanding the purpose and the underlying calculations behind Buyside, Sellside and Pivot levels.



3. Identifying Discount and Premium Zones.



4. Importance of Risk-Reward in Premium and Discount Ranges



How does the script calculate probabilities?

The script calculates the probability of each liquidity level individually. Here's the breakdown:

1. Upon the formation of a new range, the script waits for the price to reach and tap into pivot level level. Status: "■" - Inactive
2. Once pivot level is tapped into, the pivot status becomes activated and it waits for either liquidity side to be hit. Status: "▶" - Active
3. If the buyside liquidity is hit, the script adds to the count of successful buyside liquidity occurrences. Similarly, if the sellside is tapped, it records successful sellside liquidity occurrences.
4. Finally, the number of successful occurrences for each side is divided by the overall count individually to calculate the range probabilities.



Note: The calculations are performed independently for each directional range. A range is considered bearish if the previous breakout was through a sellside liquidity. Conversely, a range is considered bullish if the most recent breakout was through a buyside liquidity.



What does the multi-timeframe functionality offer?

You can incorporate up to 4 higher timeframe probabilities directly into the table.

This feature allows you to analyze the probabilities of buyside and sellside liquidity across multiple timeframes, without the need to manually switch between them.

By viewing these higher timeframe probabilities in one place, traders can spot larger market trends and refine their entries and exits with a better understanding of the overall market context.

What are the multi-timeframe underlying calculations?

The script uses the same calculations (mentioned above) and uses security function to request the data such as price levels, bar time, probabilities and booleans from the user-input timeframe.

How does the Indicator Identifies Positive Expected Values?

Quantify instantly calculates whether a trade setup has the potential to generate positive expected value (EV).

To determine a positive EV setup, the indicator uses the formula:

EV = ( P(Win) × R(Win) ) − ( P(Loss) × R(Loss))

where:

- P(Win) is the probability of a winning trade.
- R(Win) is the reward or return for a winning trade, determined by the current risk-to-reward ratio (RR).
- P(Loss) is the probability of a losing trade.
- R(Loss) is the loss incurred per losing trade, typically assumed to be -1.

By calculating these values based on historical data and the current trading setup, the indicator helps you understand whether your trade has a positive expected value.



How can I know that the setup I'm going to trade with has a positive EV?

If the indicator detects that the adjusted pivot and buy/sell side probabilities have generated positive expected value (EV) in historical data, the risk-to-reward (RR) label within the range box will be colored blue and red .

If the setup does not produce positive EV, the RR label will appear gray.

This indicates that even the risk-to-reward ratio is greater than 1:1, the setup is not likely to yield a positive EV because, according to historical data, the number of losses outweighs the number of wins relative to the RR gain per winning trade.

What is the confidence level in the indicator, and how is it determined?

The confidence level in the indicator reflects the reliability of the probabilities calculated based on historical data. It is determined by the sample size of the probabilities used in the calculations. A larger sample size generally increases the confidence level, indicating that the probabilities are more reliable and consistent with past performance.

How does the confidence level affect the risk-to-reward (RR) label?

The confidence level (★) is visually represented alongside the probability label. A higher confidence level indicates that the probabilities used to determine the RR label are based on a larger and more reliable sample size.

How can traders use the confidence level to make better trading decisions?

Traders can use the confidence level to gauge the reliability of the probabilities and expected value (EV) calculations provided by the indicator. A confidence level above 95% is considered statistically significant and indicates that the historical data supporting the probabilities is robust. This high confidence level suggests that the probabilities are reliable and that the indicator’s recommendations are more likely to be accurate.

In data science and statistics, a confidence level above 95% generally means that there is less than a 5% chance that the observed results are due to random variation. This threshold is widely accepted in research and industry as a marker of statistical significance. Studies such as those published in the Journal of Statistical Software and the American Statistical Association support this threshold, emphasizing that a confidence level above 95% provides a strong assurance of data reliability and validity.

Conversely, a confidence level below 95% indicates that the sample size may be insufficient and that the data might be less reliable. In such cases, traders should approach the indicator’s recommendations with caution and consider additional factors or further analysis before making trading decisions.

How does the sample size affect the confidence level, and how does it relate to my TradingView plan?

The sample size for calculating the confidence level is directly influenced by the amount of historical data available on your charts. A larger sample size typically leads to more reliable probabilities and higher confidence levels.

Here’s how the TradingView plans affect your data access:

Essential Plan
The Essential Plan provides basic data access with a limited amount of historical data. This can lead to smaller sample sizes and lower confidence levels, which may weaken the robustness of your probability calculations. Suitable for casual traders who do not require extensive historical analysis.

Plus Plan
The Plus Plan offers more historical data than the Essential Plan, allowing for larger sample sizes and more accurate confidence levels. This enhancement improves the reliability of indicator calculations. This plan is ideal for more active traders looking to refine their strategies with better data.

Premium Plan
The Premium Plan grants access to extensive historical data, enabling the largest sample sizes and the highest confidence levels. This plan provides the most reliable data for accurate calculations, with up to 20,000 historical bars available for analysis. It is designed for serious traders who need comprehensive data for in-depth market analysis.

PRO+ Plans
The PRO+ Plans offer the most extensive historical data, allowing for the largest sample sizes and the highest confidence levels. These plans are tailored for professional traders who require advanced features and significant historical data to support their trading strategies effectively.

For many traders, the Premium Plan offers a good balance of affordability and sufficient sample size for accurate confidence levels.

What is the HTF probability table and how does it work?

The HTF (Higher Time Frame) probability table is a feature that allows you to view buy and sellside probabilities and their status from timeframes higher than your current chart timeframe.

Here’s how it works:

Data Request: The table requests and retrieves data from user-defined higher timeframes (HTFs) that you select.

Probability Display: It displays the buy and sellside probabilities for each of these HTFs, providing insights into the likelihood of price movements based on higher timeframe data.

Detailed Tooltips: The table includes detailed tooltips for each timeframe, offering additional context and explanations to help you understand the data better.

What do the different colors in the HTF probability table indicate?

The colors in the HTF probability table provide visual cues about the expected value (EV) of trading setups based on higher timeframe probabilities:

Blue: Suggests that entering a long position from the HTF user-defined pivot point, targeting buyside liquidity, is likely to result in a positive expected value (EV) based on historical data and sample size.



Red: Indicates that entering a short position from the HTF user-defined pivot point, targeting sellside liquidity, is likely to result in a positive expected value (EV) based on historical data and sample size.

Gray: Shows that neither long nor short trades from the HTF user-defined pivot point are expected to generate positive EV, suggesting that trading these setups may not be favorable.



What machine learning techniques are used in Quantify?

Quantify offers two main machine learning approaches:
1. Adaptive Learning (Fixed Sample Size): The algorithm learns from the entire dataset without resampling, maintaining a stable model that adapts to the latest market conditions.

2. Bootstrap Resampling: This method creates multiple subsets of the historical data, allowing the model to train on varying sample sizes. This technique enhances the robustness of predictions by ensuring that the model is not overfitting to a single dataset.



How does machine learning affect the expected value calculations in Quantify?

Machine learning plays a key role in improving the accuracy of expected value (EV) calculations. By analyzing historical price action, liquidity hits, and market bias patterns, the model continuously adjusts its understanding of risk and reward, allowing the expected value to reflect the most likely market movements. This results in more precise EV predictions, helping traders focus on setups that maximize profitability.

What is the Kelly Criterion, and how does it work in Quantify?

The Kelly Criterion is a mathematical formula used to determine the optimal position size for each trade, maximizing long-term growth while minimizing the risk of large drawdowns. It calculates the percentage of your portfolio to risk on a trade based on the probability of winning and the expected payoff.



Quantify integrates this with user-defined inputs to dynamically calculate the most effective position size in percentage, aligning with the trader’s risk tolerance and desired exposure.

How does Quantify use the Kelly Criterion in practice?

Quantify uses the Kelly Criterion to optimize position sizing based on the following factors:
1. Confidence Level: The model assesses the confidence level in the trade setup based on historical data and sample size. A higher confidence level increases the suggested position size because the trade has a higher probability of success.

2. Max Allowed Drawdown (User-Defined): Traders can set their preferred maximum allowed drawdown, which dictates how much loss is acceptable before reducing position size or stopping trading. Quantify uses this input to ensure that risk exposure aligns with the trader’s risk tolerance.

3. Probabilities: Quantify calculates the probabilities of success for each trade setup. The higher the probability of a successful trade (based on historical price action and liquidity levels), the larger the position size suggested by the Kelly Criterion.

What is a trailing stoploss, and how does it work in Quantify?

A trailing stoploss is a dynamic risk management tool that moves with the price as the market trend continues in the trader’s favor. Unlike a fixed take profit, which stays at a set level, the trailing stoploss automatically adjusts itself as the market moves, locking in profits as the price advances.



In Quantify, the trailing stoploss is enhanced by incorporating market structure liquidity levels (explain above). This ensures that the stoploss adjusts intelligently based on key price levels, allowing the trader to stay in the trade as long as the trend remains intact, while also protecting profits if the market reverses.

Why would a trader prefer a trailing stoploss based on liquidity levels instead of a fixed take-profit level?

Traders who use trailing stoplosses based on liquidity levels prefer this method because:
1. Market-Driven Flexibility: The stoploss follows the market structure rather than being static at a pre-defined level. This means the stoploss is less likely to be hit by small market fluctuations or false reversals. The stoploss remains adaptive, moving as the market moves.

2. Riding the Trend: Traders can capture more profit during a sustained trend because the trailing stop will adjust only when the trend starts to reverse significantly, based on key liquidity levels. This allows them to hold positions longer without prematurely locking in profits.

3. Avoiding Premature Exits: Fixed stoploss levels may exit a trade too early in volatile markets, while liquidity-based trailing stoploss levels respect the natural flow of price action, preventing the trader from exiting too soon during pullbacks or minor retracements.



🎲 Becoming the House: Gaining an Edge Over the Market

In American roulette, the casino has a 5.26% edge due to the presence of the 0 and 00 pockets. On even-money bets, players face a 47.37% chance of winning, while true 50/50 odds would require a 50% chance. This edge—the gap between the payout odds and the true probabilities—ensures that, statistically, the casino will always win over time, even if individual players win occasionally.

From a Trader’s Perspective

In trading, your edge comes from identifying and executing setups with a positive expected value (EV). For example:
• If you identify a setup with a 55.48% chance of winning and a 1:1 risk-to-reward (RR) ratio, your trade has a statistical advantage over a neutral (50/50) probability.

This edge works in your favor when applied consistently across a series of trades, just as the casino’s edge ensures profitability across thousands of spins.

🎰 Applying the Concept to Trading

Like casinos leverage their mathematical edge in games of chance, you can achieve long-term success in trading by focusing on setups with positive EV and managing your trades systematically. Here’s how:
1. Probability Advantage: Prioritize trades where the probability of success (win rate) exceeds the breakeven rate for your chosen risk-to-reward ratio.
• Example: With a 1:1 RR, you need a win rate above 50% to achieve positive EV.
2. Risk-to-Reward Ratio (RR): Even with a win rate below 50%, you can gain an edge by increasing your RR (e.g., a 40% win rate with a 2:1 RR still has positive EV).
3. Consistency and Discipline: Just as casinos profit by sticking to their mathematical advantage over thousands of spins, traders must rely on their edge across many trades, avoiding emotional decisions or overleveraging.

By targeting favorable probabilities and managing trades effectively, you “become the house” in your trading. This approach allows you to leverage statistical advantages to enhance your overall performance and achieve sustainable profitability.

What Makes the Quantify Indicator Original?

1. Data-Driven Edge
Unlike traditional indicators that rely on static formulas, Quantify leverages probability-based analysis and machine learning. It calculates expected value (EV) and confidence levels to help traders identify setups with a true statistical edge.

2. Integration of Market Structure
Quantify uses market structure liquidity levels to dynamically adapt. It identifies key zones like swing highs/lows and liquidity traps, enabling users to align entries and exits with where the market is most likely to react. This bridges the gap between price action analysis and quantitative trading.

3. Sophisticated Risk Management
The Kelly Criterion implementation is unique. Quantify allows traders to input their maximum allowed drawdown, dynamically adjusting risk exposure to maintain optimal position sizing. This ensures risk is scientifically controlled while maximizing potential growth.

4. Multi-Timeframe and Liquidity-Based Trailing Stops
The indicator doesn’t just suggest fixed profit-taking levels. It offers market structure-based trailing stop-loss functionality, letting traders ride trends as long as liquidity and probabilities favor the position, which is rare in most tools.

5. Customizable Bias and Adaptive Learning
• Directional Bias: Traders can set a bullish or bearish bias, and the indicator recalculates probabilities to align with the trader’s market outlook.
• Adaptive Learning: The machine learning model adapts to changes in data (via resampling or bootstrap methods), ensuring that predictions stay relevant in evolving markets.

6. Positive EV Focus
The focus on positive EV setups differentiates it from reactive indicators. It shifts trading from chasing signals to acting on setups that statistically favor profitability, akin to how professional quant funds operate.

7. User Empowerment
Through features like customizable timeframes, real-time probability updates, and visualization tools, Quantify empowers users to make data-informed decisions.

Terms and Conditions | Disclaimer

Our charting tools are provided for informational and educational purposes only and should not be construed as financial, investment, or trading advice. They are not intended to forecast market movements or offer specific recommendations. Users should understand that past performance does not guarantee future results and should not base financial decisions solely on historical data.

Built-in components, features, and functionalities of our charting tools are the intellectual property of Fractalyst use, reproduction, or distribution of these proprietary elements is prohibited.

By continuing to use our charting tools, the user acknowledges and accepts the Terms and Conditions outlined in this legal disclaimer and agrees to respect our intellectual property rights and comply with all applicable laws and regulations.