Hello, traders, and welcome to another software update from your friends at TrendSpider. In this update, we’ve added an exciting new indicator to the platform; The TW Pivot by our good friend, Theta Warrior. Details after the jump!
The TW Pivot indicator seeks to provide traders with a signal when there is a higher probability for a reversal in price. The backbone of the indicator lies in the fact that price tends to revert back to the mean. Regardless of timeframe or direction, price will inevitably correct when it gets too extended. The TW Pivot indicator uses a few different elements that, when all aligned, attempt to capture said reversion. Let’s talk through the elements that the indicator contains.
As you can see in the image below, there are red and green histogram bars. The red histogram bars represent the steps toward a potential sell signal that could come at the end of the series. Inversely, the green histogram bars represent the steps toward a potential buy signal that could come at the end of the series. Both histograms will darken as the steps get closer to completion.
There is an oscillator in the middle that flips from red to green and follows price action. As price is decreasing, the oscillator is red and as price is increasing, the oscillator is green.
Finally, note the red and green vertical ‘highlighted’ columns that occur at specific points. These represent the buy and sell signals, and they will only occur when all of the factors built into the indicator align. These signals will not occur often, and that’s by design.
In the indicator parameters in the image below, you’ll see a ‘Length’ value of 9. This value represents the steps for the histogram bars. The ‘Upper’ and ‘Lower’ values represent standard deviation values, and they’re meant to give traders an idea of how far price has deviated from its mean. We can get a sense of this using the oscillating line and noting its location in relation to the horizontal standard deviation lines.
How To Read The Indicator
As can be seen in the image below, when a sell signal occurs, it is highlighted by a red vertical column. Inversely, when a buy signal occurs, it is highlighted by a green vertical column.
Traders will note instances where the count completes but there is not a vertical highlight. These instances simply mean that all of the criteria that must be met for a buy or sell signal to occur were not met and a trader should still avoid trading in the bias of the count.
In the instance of missing histogram bars, traders can think of those areas as extensions of previous histogram bars. In essence, price is continuing to extend in the direction that it was going per the previous set of histogram bars.
Finally, in the image below you’ll see an instance in which the oscillator changes color immediately after the signal is produced. This represents that the signal is no longer valid. An invalidated signal will generally occur during price extremes, so traders should be cautious during times of high volatility and momentum in either direction.
If you’re more of a visual learner, we sat down with Theta to go over exactly how he uses the indicator. In the video below, he discusses the individual parameters contained within it, as well as shows some use cases and example trades!
We hope you find this new indicator useful, and as always, if you have any questions do feel free to reach out to us in chat via the ‘Contact Us’ button in the bottom right-hand corner of your chart!