Modern Technical Indicators — Red

Discussing a New Technical Indicator and Coding it in TradingView

This article discusses one of the indicators of a set called the rainbow indicators which are structured and unique combinations of price-derived techniques aimed to help the trader predict reversals or to confirm the on-going trend. The indicator discussed is called the Red indicator, a contrarian method based on the concept of volatility re-integration.

Creating the Red Indicator

Volatility bands refer to the set of dynamic support and resistance levels calculated on the basis of moving averages and standard deviations. The most known volatility bands are the Bollinger bands which use simple moving averages and standard deviations.

The Red indicator calculates a 20-period exponential moving average which is then subtracted/added to the 20-period standard deviation with a multiplier of 2.

The Red indicator is therefore used as follows:

• A bullish signal is generated whenever the current close price surpasses the lower volatility band after having been below it for at least five periods.
• A bearish signal is generated whenever the current close price breaks the upper volatility band after having been above it…