What is top/bottom indicator?
This indicator can be useful in identifying tops, bottoms and overheated areas.
It is composed by:
an upper band, in red, indicating the area where the price begins to be overbought.
a lower band, in green, indicating the area in which the price begins to be oversold.
two divergences indicator.
a background shade used as a confirmation over a long period.
You can customize in order to achieve the best result:
the length of the period to be considered
the type of the moving average
the source on which to calculate the indicator
Upper/Lower bands are special bands as they are able to adapt to price movements as opposed to many indicators that use fixed values.
This allows the indicator to be more flexible and also identify local tops and bottoms.
As soon as the indicator enters or exceeds a range, it means that the price begins to overheat.
The indicator may stay within the band for a long time but eventually the price will tend to go in the opposite direction.
When the price tries to exit the band it implies that the market begins to be saturated and a short rally or a more prolonged trend could start.
When the indicator crosses one of the two lines it is colored red or green to indicate the bar on which it happens.
You can customize on which of the two lines the indicator should change color.
You can customize:
the first and second line of both bands
which line crossed should be marked on another color
the past periods to consider in the drawing of the bands
Because trends are composed of a series of price swings, momentum plays a key role in assessing trend strength. As such, it is important to know when a trend is slowing down. Less momentum does not always lead to a reversal, but it does signal something is changing, and the trend may consolidate or reverse.
The divergence is the disagreement between indicators and price and can help to spot when the trend is slowing down.
In order to spot divergences the formula needs to consider a past number of bars to check if in that period there is a disagreement between indicators and price.
Considering also a future period can give you a better precision but this comes to a cost, the drawing of the divergence will lag for that amount.
This configuration gives to you the ability to set up two different periods.
It is always better to have some sort of confirmation on the values indicated by the indicator. The purpose of this shadow is precisely to capture global moments without being distracted by local moments.
It is possible to change the period to be taken into consideration for the calculation of the shade.
Based on the above indicator you have also a different representaion.
When the indicator crosses the bands you have an arrow depending on which line is getting crossed.
line 1: single arrow
line 2: double arrow
both: big arrow
And yes of course you can personalize it!!