This script shows Ichimoku values in a different manner. While studying Ichimoku one thing stuck out to me and that is that the Kijun-Sen line is considered to be the equilibrium of the market, it acts like a magnet and price always returns to it. Taking this into account I made a script that plots the distance from equilibrium as an oscillator.
With that value being an oscillator it allows for some analysis that would have been harder to do looking at the normal ichimoku chart. For example smoothing the value and comparing the distance to the average distance to see if the market reached an extremity (too far from equilibrium). I added a bollinger band for those who are interested in analysing the value in that way but in my experience I do not use it except for noticing if market spiked outside of the band (green and red dots).
It is advised to use this oscillator as a trend analysis tool the same way you would use a money flow. Below a breakdown of current features
- Disequilibrium1: The white sharp wave is the raw distance from Kijun with settings to smooth it out using a WMA - Disequilibrium2: The blue smooth wave is the smooth distance from Kijun with settings to smooth it further out using a WMA - Yellow line: The distance of Tenkan-Sen from Kijun-Sen which in alot of ichimoku strategys act as a trend filter or a crossover as market change. - Green and red zone: The slope of the kumo cloud, color coded to see if kumo is red or green. Use it in the same way you would use money flow on market cypher, it is a longer term trend strength indicator and like all smoothed values it lags behind. You can use this to decide which direction to trade in but not as a signal on it's own. - Bollinger Band: Acts the same way a bollinger band does, use this to analyse the wave structure, especialy the middle line the same way you would use Disequilibrium2, if the waves are a good distance from this line market can be overbought oversold or it is just a good indication that the trend is strong. Outer bands should be your warning bands as the waves tend to jump back to the middle line when touching those.
Would love some feedback on this as I do not think this can be used for divergences but would like to hear some possible patterns/strategys. My current strategy is noticing an increasing wave after a squeeze (waves keep getting smaller untill a large trend happens, wave no longer goes to middle and keeps expanding). When I notice this I wait for the white wave to enter the blue and touch the mid bollinger line (small pullback during strong trend) and open a trade in the direction of the trend. I use the green and red zone to decide if the long term direction tells the same to get confluence.
Versionshinweise
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I've updated the script to pine version 5 and added a timeframe option. This way you can use the ichimoku values from different timeframes charts. Also added a bunch of picture to show script usage. Would love to get some more strategys from the community. I will add some strategy automation in the future.
@Honestcowboy , thanks for the interesting idea! Visual presentation is super pleasing. I have noticed that kumo cloud on your oscillator seems to better identify trend than the original kumo cloud on a 15 min TF. See below a screenshot where I have marked zones of interest with arrows.
Honestcowboy
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@Linktind, the waves do not represent the kumo cloud, they represent distance from Kijun-Sen. I personaly think the distance from Kijun-Sen is the most importand trend direction and setup tool in Ichimoku. It is the very reason I've made this indicator. The other parts are more like gadgets to look for confluence. The kumo slope part (green zone, red zone) looks at current kumo at that time, not the kumo you find below the candle. I think you are comparing the wave to the kumo cloud. Or are you comparing the kumo slope idk. Can you clarify wy these are zones of interest?
Linktind
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@Honestcowboy, thanks for the reply. I was thinking that red/green zones on the oscillator should correspond to kumo cloud itself (i.e. when kumo cloud is green then you have green color on your oscillator and vice versa). This appears not be the case. AS far as I understood the green/red color on the oscillator represents the slope of the kumo notwithstanding the fact which color is kumo cloud itself... Regarding the distance from Kijun-Sen I totaly agree with you that it appears to be the most important feature!
Honestcowboy
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@Linktind, This is where you are wrong as it does correspond to kumo cloud itself in color. Kumo cloud plots itself in the future to look at future price levels. This colors to the color of current kumo cloud and not the one of 26 candles ago (the one you find below current candle instead of most recent kumo cloud)