this indicator is an effort to determine the range where the prices are likely to fall within in the current candle.
how it is calculated 1. obtain a. gain from the open to the high b. loss from the open to the low in the last 20 (by default) candles and in the last 200 (10*20 by default) candles 2. perform a. the geometric average (sma of the log returns) over these gains and losses b. their respective standard deviation 3. plot from the open of each candle a. the average + 2 standard deviations (2 by default) of the short window size b. same for the long window size (which is overlapped)
what it shows 1. where the current candle is likely to move with 95% likelyhood
how it can be interpreted 1. a gauge for volatility in the short and long term 2. a visual inbalance between likelyhood to go up or down according to dispersion in relation to current prices or candle open. 3. a confirmation of crossings of, for instance, support and resistances once the cloud is completely above or below.
in regard to bollinger bands (which are and excellent well proven indicator) 1. it segregates upward moves from the downward ones. 2. it is hardly crossed by prices 3. it is centered on the current candle open, instead of the moving average.
we welcome feedback and critic.
best regards and success wishes.
Note di rilascio
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in this new version we've added WMA200 as a reference for trend determination. prices above WMA200, uptrend and vice versa. we've also simplified the chart letting only the visual elements concerned for the script. best regards.
Thank you very much! Question: the 95% likelihood was tested on which stocks/assets? Is it strictly crypto oriented or can be used in regular stock market? Also does it suppose to work with a larger timeframes also (W/M)?
greenfield_br
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@vininull, thank you for your interest in our work. the 95% comes from the 2 standard deviations around the average. it, thus, embeds the assumption that the distribution of subsequent ticks following the candle open is normal (follows the bell curve). similar assumption is made by the black-scholes model when pricing options. there is no technical barrier to use it in any other asset, instrument or timeframe. they might even suit it better than the one used in the demo. so, there is nothing asset or timeframe specific in this script. however, not all assets or instruments exhibit the same dynamics specially across different timeframes. thus, some (both assets/instruments and timeframes) might be better choices for this script. the personal goal achieved with this indicator is order positioning. the extremes of the cloud are likely to ponder well the likelihood of being filled while not at a disadvantageous price. success wishes. best.
Question: the 95% likelihood was tested on which stocks/assets? Is it strictly crypto oriented or can be used in regular stock market?
Also does it suppose to work with a larger timeframes also (W/M)?