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Initial Balance Wave Map📊 Initial Balance Wave Map – Powered by VWAP Wave The Initial Balance Wave Map is your visual roadmap for navigating the first hour of trading like a pro. Built to align with the VWAP Wave System, this indicator automatically plots the Initial Balance (IB) high and low, calculates real-time IB extensions, and layers in key midpoints and volume-based structure to map out high-probability zones for both reversals and breakouts. This upgraded indicator builds upon the open-source foundation by @noop-noop, with enhancements and user-facing labels tailored for Auction Market Theory, scalping, and structure-based trade setups. 🔍 Key Features: ✅ Automatically plots IB High/Low based on session times (customizable) 🔁 Displays +1x / +2x IB extensions and midpoints for precision targeting 📐 Integrated with VWAP Wave strategy: use with deviation bands for full context 🎯 Works across futures, forex, and crypto — universal structure map 🎨 Optional visual highlights for calculation window and labeling 💡 How to Use: Fade setups: Look for price rejection at ±1x or ±2x IB extensions inside a balanced market. Breakout setups: Combine IB breaks with VWAP Wave price discovery for high-momentum plays. Return to value: When price rejects extension levels and rotates, target the IB midpoint or VWAP. Whether you’re scalping futures like NQ & ES, swinging gold, or analyzing forex pairs, the Initial Balance Wave Map gives you the structural clarity to react instead of guess. For more information, visit vwapwave.com and find the VWAP Wave System official published book on Amazon.com . 🙌 Credits: This script builds upon the excellent open-source work by @noop-noop. Original script available here .
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traderdrysdale tarafından
Momentum CCI Trend Following StrategyMomentum CCI Trend Following Strategy The Momentum CCI Trend Following Strategy leverages dual Commodity Channel Index (CCI) indicators to identify momentum-driven trends, offering both long and optional short trading capabilities. By combining a 50-period Long CCI for trend direction with a 5-period Short CCI for momentum signals, it provides clear entry and exit points for traders. The strategy supports two-way trading, allowing users to toggle short positions to capitalize on both bullish and bearish markets. SETTINGS Long CCI Period: Defines the period (default: 50) for the Long CCI, used to gauge the primary trend direction. Short CCI Period : Sets the period (default: 5) for the Short CCI, used to detect momentum shifts. Enable Short Order Book : A boolean toggle (default: false) to enable or disable short trading, allowing flexibility for long-only or two-way trading strategies.
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withoutbug tarafından
Multi-Timeframe PivotDescription: This script provides an advanced tool for multi-timeframe pivot point analysis. It identifies swing points based on a candle's relationship to its neighbors. The default strength settings of 1 align with the Inner Circle Trader (ICT) concept of market structure. The ICT concept defines a swing point based on a simple 3-candle pattern: - A swing high is a candle where the candles to the immediate left and right both have lower highs. - A swing low is a candle where the candles to the immediate left and right both have higher lows. A key feature is its ability to accurately calculate and translate pivot points from up to five higher timeframes (HTFs) and display them precisely on a lower timeframe (LTF) chart. NOTE: This indicator is designed to show HTF data on an LTF chart. If you select a timeframe in the settings that is lower than your current chart's timeframe, it will show pivots for the chart's timeframe instead. Core Features: - Up to five independent higher timeframes. - Per-timeframe customization for pivot strength (left/right bars) and color. - Optional "Watchlines" that project the price of each pivot forward, complete with a text label identifying the timeframe. - An optional "Alignment Model" that colors the background when price is aligned across all active timeframes (requires at least 2 TFs to be enabled). Default State: For a clean initial application, the Watchlines and Alignment Model features are disabled by default but can be enabled in the settings.
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nickbonenkamp tarafından
[eLm] 0-1-2# 📈 Market Structure Indicator – Counter System This indicator dynamically analyzes price action to detect key market structure shifts and trend strength using four essential formations: ## 🔍 Detected Structures - **Higher High (HH):** A candle forming a new high above recent peaks - **Lower Low (LL):** A candle forming a new low below recent bottoms - **Higher Low (HL):** A higher dip, indicating potential trend continuation - **Lower High (LH):** A lower peak, signaling potential weakness ## 🧠 Structure Protection Logic After a HH or LL is formed, if price does not breach that level within a user-defined number of candles, the level is considered **"protected."** This provides insight into trend strength and market reaction. ## 🔢 HL / LH Counter System - Each HL or LH increases a counter. - A new HH or LL **resets** the corresponding counter to zero. > This helps visualize how many consecutive HL or LH structures have occurred — useful for measuring trend momentum. ## 🎯 Use Cases - Trend following and confirmation - Early trend reversal detection - Building structure-based trading strategies - Understanding price behavior and market intent --- > **Note:** This indicator does not provide financial advice. It is designed to support technical analysis with clear, structure-based visual signals.
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elmasgunes tarafından
ATR Stop-Loss with Fibonacci Take-Profit [jpkxyz]ATR Stop-Loss with Fibonacci Take-Profit Indicator This comprehensive indicator combines Average True Range (ATR) volatility analysis with Fibonacci extensions to create dynamic stop-loss and take-profit levels. It's designed to help traders set precise risk management levels and profit targets based on market volatility and mathematical ratios. Two Operating Modes Default Mode (Rolling Levels) In default mode, the indicator continuously plots evolving stop-loss and take-profit levels based on real-time price action. These levels update dynamically as new bars form, creating rolling horizontal lines across the chart. I use this mode primarily to plot the rolling ATR-Level which I use to trail my Stop-Loss into profit. Characteristics: Levels recalculate with each new bar All selected Fibonacci levels display simultaneously Uses plot() functions with trackprice=true for price tracking Custom Anchor Mode (Fixed Levels) This is the primary mode for precision trading. You select a specific timestamp (typically your entry bar), and the indicator locks all calculations to that exact moment, creating fixed horizontal lines that represent your actual trade levels. Characteristics: Entry line (blue) marks your anchor point Stop-loss calculated using ATR from the anchor bar Fibonacci levels projected from entry-to-stop distance Lines terminate when price breaks through them Includes comprehensive alert system Core Calculation Logic ATR Stop-Loss Calculation: Stop Loss = Entry Price ± (ATR × Multiplier) Long positions: SL = Entry - (ATR × Multiplier) Short positions: SL = Entry + (ATR × Multiplier) ATR uses your chosen smoothing method (RMA, SMA, EMA, or WMA) Default multiplier is 1.5, adjustable to your risk tolerance Fibonacci Take-Profit Projection: The distance from entry to stop-loss becomes the base unit (1.0) for Fibonacci extensions: TP Level = Entry + (Entry-to-SL Distance × Fibonacci Ratio) Available Fibonacci Levels: Conservative: 0.618, 1.0, 1.618 Extended: 2.618, 3.618, 4.618 Complete range: 0.0 to 4.764 (23 levels total) Multi-Timeframe Functionality One of the indicator's most powerful features is timeframe flexibility. You can analyze on one timeframe while using stop-loss and take-profit calculations from another. Best Practices: Identify your entry point on execution timeframe Enable "Custom Anchor" mode Set anchor timestamp to your entry bar Select appropriate analysis timeframe Choose relevant Fibonacci levels Enable alerts for automated notifications Example Scenario: Analyse trend on 4-hour chart Execute entry on 5-minute chart for precision Set custom anchor to your 5-minute entry bar Configure timeframe setting to "4h" for swing-level targets Select appropriate Fibonacci Extension levels Result: Precise entry with larger timeframe risk management Visual Intelligence System Line Behaviour in Custom Anchor Mode: Active levels: Lines extend to the right edge Hit levels: Lines terminate at the breaking bar Entry line: Always visible in blue Stop-loss: Red line, terminates when hit Take-profits: Green lines (1.618 level in gold for emphasis) Customisation Options: Line width (1-4 pixels) Show/hide individual Fibonacci levels ATR length and smoothing method ATR multiplier for stop-loss distance
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jpkxyz tarafından
Omega Market Mood Meter [OmegaTools]The Omega Market Mood Meter is a precision-built sentiment oscillator that captures the market’s emotional intensity through a multi-layered RSI system. Designed for traders who seek to align with the market's true behavioral state, it blends momentum readings with a brand-new, rarely-seen innovation: the Sentiment-Weighted Moving Average (WMA-Ω)—a trend filter that dynamically adjusts to the market’s psychological tone. 🧠 Market Mood Oscillator At its core, the Ω 3M oscillator aggregates three RSI-based components: RSI(9) on close — captures short-term tension; RSI(21) on HLC3 — balances medium-term positioning; RSI(50) on HL2 — reflects long-term directional weight. Each input is scaled and weighted to contribute to a final oscillator centered around zero, with ±50 and ±100 acting as key sentiment boundaries. When values exceed ±100, the market is likely reaching emotional extremes—zones that often precede reversals or require caution. Visual features include: Dynamic Background Highlighting: automatically emphasizes extreme sentiment zones. Reference Lines: plotted at ±100, ±50, and 0 for fast sentiment interpretation. 🔥 WMA-Ω: Sentiment-Weighted Moving Average The standout innovation of this tool is the Weighted Market Mood Moving Average, or WMA-Ω—a proprietary calculation that averages price using the absolute value of sentiment as its weighting force. This approach gives greater importance to price during periods of strong emotional conviction (either bullish or bearish), resulting in a context-aware trend filter that reacts only when sentiment truly matters. This technique: Filters noise during low-volatility or indecisive conditions; Enhances reliability by reacting to meaningful sentiment surges; Offers a more psychologically-adjusted trend baseline compared to traditional MAs. Visually: When price is above WMA-Ω, a semi-transparent bullish fill highlights underlying strength; When below, a bearish fill reveals dominant downward sentiment. This feature is unique among public TradingView tools and provides an edge in identifying trend quality with psychological context. ✅ How to Use Extreme Sentiment Zones (±100): Use as contrarian warning zones or signal dampeners. Crosses of WMA-Ω: Treat these as psychological trend confirmations; price above indicates structurally bullish sentiment and vice versa. Range-bound Bias: Between ±50, sentiment may be indecisive; watch for breakout or alignment with WMA-Ω. Advanced Confluence: Combine with other Omega tools (e.g., Ω Bias Forecaster, Ω IV Walls) for powerful regime-based strategies. Omega Market Mood Meter is ideal for discretionary and systematic traders who want a clean, multi-timeframe sentiment readout and a cutting-edge weighted trend engine grounded in market psychology.
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OmegaTools tarafından
2
SQZMOM Breakout Strategy📌 SQZMOM Breakout Strategy – Optimized for 15-Minute Intraday Trading SQZMOM Breakout Strategy is a momentum and volatility-based algorithmic trading system, primarily built around the Squeeze Momentum (SQZMOM) indicator. It is specifically optimized for 15-minute timeframes to exploit intraday breakouts and trend continuations. 📊 Key Features: ✅ Breakout signals based on the Squeeze Momentum indicator ✅ Trend filter using 200-period WMA (visual only, not affecting entries) ✅ RSI filter to avoid trades in overbought/oversold zones ✅ Volume and ATR filters to confirm breakout quality ✅ Position sizing dynamically scales from 5% to 20% based on signal strength ✅ Trailing Stop Loss based on user-adjustable ATR multiple (default: 2.0 ATR) ✅ No fixed Take Profit: trades ride the trend using trailing stops ⚙️ Configurable Inputs: Bollinger Band & Keltner Channel parameters RSI thresholds (fixed at 40 to avoid early entries against momentum) Trailing Stop distance defined by ATR Multiplier for Trailing Stop All parameters are user-tunable for further optimization 🟢 When Does It Enter a Trade? Long Entry: SQZMOM fires bullish breakout + momentum increases + price above WMA200 + sufficient volume & ATR + RSI > 40 Short Entry: SQZMOM fires bearish breakout + momentum decreases + price below WMA200 + sufficient volume & ATR + RSI < 40 Signal entries are deferred until all filters (especially RSI) align — no crossover logic is used 🎯 Trade Management: Position Sizing: Adjusted according to momentum strength (val), from 5% to 20% Exit Strategy: Trailing Stop only, no hard TP — lets profits run TP/SL logic: Trailing SL moves dynamically with price, distance = ATR × multiplier 📚 Scientific & Practical Foundations: The model is inspired by John Carter’s “TTM Squeeze” principle: volatility contraction followed by explosive momentum Position sizing and ATR-based trailing logic follow Ernie Chan’s adaptive risk framework in Algorithmic Trading (2013) RSI as a trend-quality gate is consistent with classic momentum confirmation rules
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ALCIVOOO tarafından
1
RISK## Main Purpose The indicator calculates and displays risk levels based on margin requirements and daily settlement prices, helping traders visualize their potential risk exposure. ## Key Features **Inputs:** - **Margin for Calculation**: The CME long margin requirement for the asset - **HTF Margin Line**: An anchor point for higher timeframe margin calculations **Core Calculations:** 1. **Settlement Price Tracking**: Captures daily settlement prices during specific session times (6:58-6:59 PM ET for close, 6:00-6:01 PM ET for new day open) 2. **Risk Percentage**: Calculates `margin / (point value × settlement price)` - with special handling for Micro contracts (symbols starting with "M") that uses 10× point value 3. **Risk Intervals**: Determines price intervals representing one margin unit of risk ## Visual Display The indicator plots multiple risk levels on the chart: - **Settlement price** (orange circles) - **Globex open** (green circles) - **Upper/Lower Risk levels** (red circles) - one and two risk intervals away - **Subdivision levels** (blue crosses) - 25%, 50%, and 75% of each risk interval - **MHP+ level** (black crosses) - HTF anchor adjusted by risk percentage - **HTF Anchor** (black crosses) ## Practical Use This helps futures traders: - Visualize how far price can move before hitting margin calls - See risk levels relative to daily settlements - Plan position sizing and risk management - Understand exposure in terms of actual margin requirements The indicator essentially transforms abstract margin numbers into concrete price levels on the chart, making risk management more visual and intuitive.
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Fractaldactyl tarafından
FinhedgesFinhedges is a professional-grade trend analysis tool designed for precision trading. Built for traders who demand clarity, accuracy, and reliability, this indicator empowers users with real-time market insights while maintaining a clean and user-friendly visual interface. ✅ Key Features: 📈 Advanced Trend Detection: Accurately identifies prevailing market trends to guide directional bias. 🟢🔴 Intelligent Signal System: Displays high-quality Buy and Sell signals optimized for both swing and intraday trading. 🧠 Smart Filtering Logic: Reduces noise and false signals for higher conviction entries. 📊 Customizable Trend Line: Visualizes trend direction clearly across all timeframes. ⏰ Built-in Alerts: Real-time notifications so you never miss a key opportunity. 📋 Optional Market Status Table: Provides a quick overview of trend and price data directly on the chart.
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Finhedges tarafından
Pivot Swings w Table Pivot Swings w Table — Intraday Structure & Range Analyzer This indicator identifies key pivot highs and lows on the chart and highlights market structure shifts using a real-time table display. It helps traders visually confirm potential trade setups by tracking unbroken swing points and measuring the range between the most recent pivots. 🔍 Features: 🔹 Automatic Pivot Detection using configurable left/right bar logic. 🔹 Unbroken Pivot Filtering — only pivots that haven't been invalidated by price are displayed. 🔹 Dynamic Range Table with: Latest valid Pivot High and Pivot Low Total Range Width Upper & Lower 25% range thresholds (useful for value/imbalance analysis) 🔹 Trend-Based Color Coding — the table background changes based on which pivot (high or low) occurred more recently: 🟥 Red: Downward bias (last pivot was a lower high) 🟩 Green: Upward bias (last pivot was a higher low) 🔹 Optional extension of pivot levels to the right of the chart for support/resistance confluence. ⚙️ How to Use: Adjust the Left Bars and Right Bars inputs to fine-tune how swings are defined. Look for price reacting near the Upper or Lower 25% zones to anticipate mean reversion or breakout setups. Use the trend color of the table to confirm directional bias, especially useful during consolidation or retracement periods. 💡 Best For: Intraday or short-term swing traders Traders who use market structure, support/resistance, or trend-based strategies Those looking to avoid low-quality trades in tight ranges ✅ Built for overlay use on price charts 📈 Works on all symbols and timeframes 🧠 No repainting — pivots are confirmed with completed bars
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immediatePerso44773 tarafından
GER40 Opening Range Breakout (Advanced)🔥 GER40 (DAX40) Opening Range Breakout Strategy 📌 Overview: This strategy takes advantage of the high volatility and liquidity during the Frankfurt and London session openings (8:00–10:00 CET). It’s especially suitable for day traders who want to capitalize on early momentum. ✅ Strategy Steps: 1. Mark the Opening Range (08:00–08:15 CET) Wait for the first 15 minutes after the Frankfurt open (08:00 CET). Draw horizontal lines at the high and low of this range. 2. Entry Rules: Buy when price breaks above the opening range high with strong volume. Sell (short) when price breaks below the opening range low with strong volume. 3. Confirmation (optional but helpful): Use a momentum indicator like RSI (above 50 for long, below 50 for short) or MACD crossing above/below the signal line. Look for volume spike at breakout for validation. 4. Stop-Loss: Set just below the range low (for long) or above the range high (for short). Or use a fixed pip/point stop-loss like 15–25 points depending on current volatility. 5. Take Profit / Exit: 1:1.5 to 1:2 Risk/Reward Ratio. Or scale out at fixed points (e.g., +20, +40). Or trail stop after price moves in favor by +20 points. 📊 Additional Filters to Improve Accuracy: Check macroeconomic calendar (avoid entering during red news like ECB, German CPI, etc.). Use VWAP as a dynamic support/resistance for bias direction. Use 5-min or 15-min charts for better signal clarity. 📈 Example: Let’s say the DAX opens at 08:00 CET, and by 08:15, the high is 18,000 and the low is 17,950. If price breaks above 18,000 with volume and RSI > 50, enter long. Place stop at 17,950 or slightly below. Take profit at 18,030–18,050 or trail stop. 🧠 Pro Tips: GER40 is highly volatile, so ensure your risk per trade is small (e.g., 1% or less). Avoid trading around major news (ECB rate decisions, German GDP, etc.). Best sessions for GER40: Frankfurt Open (08:00 CET) and London Open (09:00 CET).
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Abanobi tarafından
Market Maker Trap Reversal V1Market Maker Trap Reversal V1 is a lightweight, precision-focused tool designed to detect the same liquidity manipulation tactics used by institutional players and market makers. This script identifies key liquidity sweeps of prior swing highs/lows and confirms trap reversals when price closes back inside the swept range — a signature move of smart money designed to trap retail breakout traders. Built for disciplined execution, this tool includes: ✅ Sweep detection using custom swing lookbacks ✅ Convincing trap confirmation (strong candle body) ✅ Optional NY session filter for optimal timing ✅ Clean long/short alerts for seamless automation ✅ No indicators — just raw price action and intent Use this strategy to mirror market maker logic, avoid false breakouts, and trade with real conviction around liquidity events. **Coded with the help of Zero"
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Icarus16 tarafından
Price Change Rate with Pivot Labels (%)Bull/Bear labels to show the exact price change percentage at the pivot. 1. Calculates Price Change % Measures the percentage change in closing price over a user-defined number of bars. 2. Identifies Pivot Points Finds local highs (pivot highs) and lows (pivot lows) using configurable left/right bar settings. 3. Labels Bullish/Bearish Trends Bull label: Appears at pivot lows if price is rising and forming higher lows. Bear label: Appears at pivot highs if price is falling and forming lower highs. 4. Displays % on Labels Each label includes the current price change percentage, e.g., "Bull +2.34%" "Bear -1.78%" 5. Optional Visuals Pivot shapes (triangles) are plotted for clarity.
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Tradegeek21 tarafından
RSI-Adaptive T3 + Squeeze Momentum Strategy✅ Strategy Guide: RSI-Adaptive T3 + Squeeze Momentum Strategy 📌 Overview The RSI-Adaptive T3 + Squeeze Momentum Strategy is a dynamic trend-following strategy based on an RSI-responsive T3 moving average and Squeeze Momentum detection . It adapts in real-time to market volatility to enhance entry precision and optimize risk. ⚠️ This strategy is provided for educational and research purposes only. Past performance does not guarantee future results. 🎯 Strategy Objectives The main objective of this strategy is to catch the early phase of a trend and generate consistent entry signals. Designed to be intuitive and accessible for traders from beginner to advanced levels. ✨ Key Features RSI-Responsive T3: T3 length dynamically adjusts according to RSI values for adaptive trend detection Squeeze Momentum: Combines Bollinger Bands and Keltner Channels to identify trend buildup phases Visual Triggers: Entry signals are generated from T3 crossovers and momentum strength after squeeze release 📊 Trading Rules Long Entry: When T3 crosses upward, momentum is positive, and the squeeze has just been released. Short Entry: When T3 crosses downward, momentum is negative, and the squeeze has just been released. Exit (Reversal): When the opposite condition to the entry is triggered, the position is reversed. 💰 Risk Management Parameters Pair & Timeframe: BTC/USD (30-minute chart) Capital (simulated): $30,00 Order size: `$100` per trade (realistic, low-risk sizing) Commission: 0.02% Slippage: 2 pips Risk per Trade: 5% Number of Trades (backtest period): 181 📊 Performance Overview Symbol: BTC/USD Timeframe: 30-minute chart Date Range: January 1, 2024 – July 3, 2025 Win Rate: 47.8% Profit Factor: 2.01 Net Profit: 173.16 (units not specified) Max Drawdown: 5.77% or 24.91 (0.79%) ⚙️ Indicator Parameters Indicator Name: RSI-Adaptive T3 + Squeeze Momentum RSI Length: 14 T3 Min Length: 5 T3 Max Length: 50 T3 Volume Factor: 0.7 BB Length: 27 (Multiplier: 2.0) KC Length: 20 (Multiplier: 1.5, TrueRange enabled) 🖼 Visual Support T3 slope direction, squeeze status, and momentum bars are visually plotted on the chart, providing high clarity for quick trend analysis and execution. 🔧 Strategy Improvements & Uniqueness Inspired by the RSI Adaptive T3 by ChartPrime and Squeeze Momentum Indicator by LazyBear , this strategy fuses both into a hybrid trend-reversal and momentum breakout detection system . Compared to traditional trend-following methods, it excels at capturing early trend signals with greater sensitivity . ✅ Summary The RSI-Adaptive T3 + Squeeze Momentum Strategy combines momentum detection with volatility-responsive risk management. With a strong balance between visual clarity and practicality, it serves as a powerful tool for traders seeking high repeatability. ⚠️ This strategy is based on historical data and does not guarantee future profits. Always use appropriate risk management when applying it.
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PakunFX tarafından
Victor Osimhen Galatasaray⚽ Victor Osimhen Strategy – Ride the Momentum, Rule the Market! Hello dear trader! 👋 We’re proud to introduce a strategy designed for crypto markets, built to be fast, smart, and resilient — just like its namesake: 📈 The Victor Osimhen Strategy ⚽ Much like the unstoppable striker himself, this strategy: Kicks off early Strikes at the right moment Knows exactly when to exit the field 🧠 What Powers the Strategy? Victor Osimhen is based on three proven elements: WaveTrend – A powerful momentum signal for entry Volatility Stop (VStop) – A trend direction filter Advanced Trailing Stop – A smart exit that adapts to price action With full Multi-Timeframe (MTF) support, it tracks the bigger picture while reacting to finer movements: For example: While viewing the 4H chart, it listens to signals from the 2H timeframe, offering early and more accurate entries/exits. 🪙 Why Does It Work Better in Crypto? ✅ It’s built for the high volatility and 24/7 nature of crypto markets ✅ It reacts fast to momentum shifts ✅ It filters out noise using trend confirmation ✅ And it adapts dynamically with its advanced trailing exit logic 🎁 A Friendly Request If this strategy brings you profits — and if you feel like sharing the joy — we’d be truly happy if you considered donating a portion to Galatasaray Sports Club 💛❤️ (Of course, this is entirely voluntary and from the heart!) 🔒 Final Reminder This strategy isn’t magic — but when used with discipline, patience, and risk control, it can be a game-changer. Please test it in demo mode first, and only go live when you're ready. 🏁 Good Luck! With the Victor Osimhen Strategy, you're now equipped to: ✅ Catch early momentum ✅ Stay aligned with the trend ✅ Protect your profits with style Wishing you strong signals and solid trades!
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ALCIVOOO tarafından
Tsallis Entropy Market RiskTsallis Entropy Market Risk Indicator What Is It? The Tsallis Entropy Market Risk Indicator is a market analysis tool that measures the degree of randomness or disorder in price movements. Unlike traditional technical indicators that focus on price patterns or momentum, this indicator takes a statistical physics approach to market analysis. Scientific Foundation The indicator is based on Tsallis entropy, a generalization of traditional Shannon entropy developed by physicist Constantino Tsallis. The Tsallis entropy is particularly effective at analyzing complex systems with long-range correlations and memory effects—precisely the characteristics found in crypto and stock markets. The indicator also borrows from Log-Periodic Power Law (LPPL). Core Concepts 1. Entropy Deficit The primary measurement is the "entropy deficit," which represents how far the market is from a state of maximum randomness: Low Entropy Deficit (0-0.3): The market exhibits random, uncorrelated price movements typical of efficient markets Medium Entropy Deficit (0.3-0.5): Some patterns emerging, moderate deviation from randomness High Entropy Deficit (0.5-0.7): Strong correlation patterns, potentially indicating herding behavior Extreme Entropy Deficit (0.7-1.0): Highly ordered price movements, often seen before significant market events 2. Multi-Scale Analysis The indicator calculates entropy across different timeframes: Short-term Entropy (blue line): Captures recent market behavior (20-day window) Long-term Entropy (green line): Captures structural market behavior (120-day window) Main Entropy (purple line): Primary measurement (60-day window) 3. Scale Ratio This measures the relationship between long-term and short-term entropy. A healthy market typically has a scale ratio above 0.85. When this ratio drops below 0.85, it suggests abnormal relationships between timeframes that often precede market dislocations. How It Works Data Collection: The indicator samples price returns over specific lookback periods Probability Distribution Estimation: It creates a histogram of these returns to estimate their probability distribution Entropy Calculation: Using the Tsallis q-parameter (typically 1.5), it calculates how far this distribution is from maximum entropy Normalization: Results are normalized against theoretical maximum entropy to create the entropy deficit measure Risk Assessment: Multiple factors are combined to generate a composite risk score and classification Market Interpretation Low Risk Environments (Risk Score < 25) Market is functioning efficiently with reasonable randomness Price discovery is likely effective Normal trading and investment approaches appropriate Medium Risk Environments (Risk Score 25-50) Increasing correlation in price movements Beginning of trend formation or momentum Time to monitor positions more closely High Risk Environments (Risk Score 50-75) Strong herding behavior present Market potentially becoming one-sided Consider reducing position sizes or implementing hedges Extreme Risk Environments (Risk Score > 75) Highly ordered market behavior Significant imbalance between buyers and sellers Heightened probability of sharp reversals or corrections Practical Application Examples Market Tops: Often characterized by gradually increasing entropy deficit as momentum builds, followed by extreme readings near the actual top Market Bottoms: Can show high entropy deficit during capitulation, followed by normalization Range-Bound Markets: Typically display low and stable entropy deficit measurements Trending Markets: Often show moderate entropy deficit that remains relatively consistent Advantages Over Traditional Indicators Forward-Looking: Identifies changing market structure before price action confirms it Statistical Foundation: Based on robust mathematical principles rather than empirical patterns Adaptability: Functions across different market regimes and asset classes Noise Filtering: Focuses on meaningful structural changes rather than price fluctuations Limitations Not a Timing Tool: Signals market risk conditions, not precise entry/exit points Parameter Sensitivity: Results can vary based on the chosen parameters Historical Context: Requires some historical perspective to interpret effectively Complementary Tool: Works best alongside other analysis methods Enjoy :)
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HenriqueCentieiro tarafından