Trend Analysis and Divergence Filter This tool helps you to read trend strength and spot divergences, to be ready for a reversal.
All the tool is based on a colorcode: - bright colors = impulse bars. - hard colors = consolidation / continuation bars. - light colors = weakness bars. => You can choose to use barcolor, or not, and simply use the indicator. Divergences occured on the histogram, when the price makes a local high/low, but the histogram in the black zone. Also, the reason why i created is that it is insanely accurate to spot divergences in an established trend.
#In an uptrend: - If prices makes a higher high, - But bar color is green light (or histogram is in the blackzone), it's probably the end of the move and a regular bearish divergence is happening. => Take profit and open a short.
#In a downtrend : - If price makes a lower low, - But bar color is red light (or histogram is in the blackzone), it's probably the end of the move and a regular bullish divergence is happening. => Take profit and open a long.
To sum up: - when you see light bars, or if the histogram is in the blackzone, be prepared for a move. - To choose the direction, check for divergences before entering.
To get the most benefit of this indicator, use it in a multi timeframe strategy : The indicator will give you the best results in the subordinate timeframe, considering you trade using a macro trend, a parent and a subordinate one.