Kaizen Coloring

Introduction To Kaizen Coloring

This tool was made for Kaizen, this indicator is to be utilized with a trend trading system.

Most trend systems are lagging, longing a "bullish trend" for most traders will lead to longing the top of ranges, or longing erroneously with poor risk management.

Below are explanations to the settings and are straight forward to understand.

Settings Overview
Existing Settings



Candle Settings
As you can see there a 2 types of candle display logic, one works on the users chart, this will be the default setting as most users will not go into tradingview and tinker with chart settings even if you ask them to.
The benefit of this is that users will have an easy set up process



Below I have included the display of both [Body/Candle Creation Coloring]

Body Coloring



Candle Creation Coloring



Pros of Body Coloring: Using the wicks and borders of the original chart can let users more easily identify if a candle was a positive (close > open) candle or negative (close < open) this may help inform their decision.

Pros of Candle Creation: Trend logic is easier to spot, especially when zooming out as a singular color with no interference of wick/border, less noise, focus on the indicator logic.


Trend Coloring Types

Simple Coloring



Advanced Coloring



The coloring options have fundamentally different logic,
The Simple Coloring is best for capturing trapped momentum (will be explained in how to trade), as its a lot faster to react to trend dynamics,
Advanced is best for the band, as the band primarily serves as a structure, the coloring showing a greater range in the momentum e.g. strong bullish, bullish and bullish exhaustion and vice versa allows the band coloring to act as a filter.
Structure shift, + less likely to be a fakeout and usable for entry.
If the band changed color rapidly it can be a distraction I prefer having the band show the ranges of momentum, and the candle coloring be simple as its pure naked price action shouldn't be overly filtered. Price action is still the most important.

Band Settings



The band has 2 main settings, coloring, and responsiveness. The coloring has 3 modes, Simple, Advanced and Band.
Band coloring is the simplest, its the best for pure scanning multiple coins quickly but I do not recommend it for trading.

Slow Responsiveness



The slow system, works best for a detection into a structure shift, once flipped it should be used as an alert that the direction has changed, a retest in either the band, OR price action is a trading opportunity (coloring will come into this shortly)

Fast Responsiveness



The fast band system, as you can see on the left side is useful for structure shift. However, towards the middle, you can see how it can give more false positives, this is fine, in my opinion using this should be with active trading, being able to scale in and out quickly based on reaction to the band flips is imperative to the trade.

Alerts

Instructions included on image, we can discuss adding one for the main trading use case if you will find it helpful, after testing we can discuss if you want to add some extra alerts.



Trading Logic



This indicator can be used for a hands off approach for trading.

A slow band responsiveness easier to notice potential change in environment. Fast responsiveness is better when managed actively for quick trades.

For the candles, Simple Coloring, is our preference at all times, price action is the best representation of momentum when trading, all indicators are built on price and can only react to price, overly smoothing or slowing trend detection is counter productive to behavior of price action.

Following the former day pump, looking for an entry to long, we noticed the structure shift in the Band portion of this indicator (left side circled in blue), as a result it was inadequate to long.
Looking for shorts is now most optimal, so avoid taking longs and wait for a new shift.

The simple coloring here works perfectly on the candles as its highlighting there was bullish momentum, as you can see the bullish momentum was going into the band, but failed to capture continuation.

The issue with all trend indicators is the lagging nature of any indicator, as a result most new traders see "green = long" this is bad mindset, it reduces your entry from being an ideal entry to more of a fomo based chase. Putting you offside to any correction, additionally no indicator can determine if momentum will continue, so you need to use price action accordingly.

Keeping that in mind, if you study trading liquidity and delta, you can often see traders joining a trend late, in this sense, we look to see the band shift as bearish structure, and the candle coloring highlighting late longers, and failed momentum. These are our trapped traders,
Using this to short, or in my instance, avoid taking any longs, is most optimal as your short entry position is clearly defined, and invalidation is simple - a band shift or price action reclaim of the level that was "trapped momentum/bullish candles".

This provides you with the most optimal usage on how to use Kaizen coloring, or most trend tools if well made should follow this logic (often trend tools fail to do both coloring for momentum, or a band for structure/entry, Kaizen Coloring provides both). Longing GREEN or Shorting Red is an easy way to lose.

Long the trapped bearish Momentum, Short trapped bullish momentum.

On the right hand side we can see the similar play out but on the opposite side, there was in fact a deviation of the band, but following price action principles, you wouldn't set your stops at support

You should scale your limits into support and increasingly so, your invalidation is loss of support, your entry would be closer to the invalidation and your momentum trap, (red tap into support), then the band reclaim is your long thesis.

Band Coloring is set to advanced, the benefit is the ease of seeing the shift from red to green on reclaims, having the band be smooth coloring will strengthen the understanding of the structure shift.

To summarise preferences:
Simple Coloring candles, easy momentum detection,
Slow band when taking trades intermittently
Advanced Coloring band for quick confirmation of structure shifts