Credit Spreads Trend Trading Indicator

20 Sep 2023

This is a credit spreads trend following indicator designed to assist credit spreads traders in identifying trends and exploring trade ideas.

High Level Overview

It is based on a 200 period moving average line and incorporates calculations related to expected moves, which are derived from the stock's historical volatility. These calculations generate bands that may suggest possible ranges and trends. For example, the green band is one standard deviation based on historical volatility above the 200 period moving average while the red band is one standard based on historical volatility below the 200 period moving average. The grey line on the chart is the 200 period moving average. Historical volatility in this instance is calculated by looking at the last 252 candles.

How You Can Use It

You can use these bands to assist in trend analysis. For instance, if the stock is above the green line, the stock typically appears to be bullish. If the stock is below the red line, the stock typically appears to be bearish. When the market is between the red line and green, the stock trends to be sideways. With this information on the trend, it can assist you in coming up with credit spread trade ideas (put credit spread = bullish and call credit spread = bearish). The credit spread trade ideas table on the chart will show case a potential trade idea based on the percentage out of the money you want to place the trade (this is set in your settings).

This indicator has taken me 6 years to build, so I hope you enjoy it :)


Algorithm breakdown

• Above the green line: bullish trend
  
• Below the red line: bearish trend
  
• Between the red and green line: sideways market
  
• Above the top yellow line (optional): overbought market
  
• Below the bottom yellow line (optional): oversold market
  

Understand The Settings

• Plot breakout arrows?: shows arrows when the stock crossed one of the major lines
  
• Show standard deviation high and low: shows where the market will top out and bottom out (mathematically)
  
• SMA length: the length of the midline which is a simple moving average indicator
  
• Show credit spreads recommendation: gives you trade ideas based on the stock's trend
  
• Percentage out of the money: how far the recommended trade idea is out of the money
  

Keep in mind, this indicator may serve as a tool for potential trend identification and generating credit spread trade concepts, but it's essential to conduct your research and exercise due diligence beforehand.

30 Sep 2023

Catatan Rilis

Fix the input fields to be labeled correctly (there was two upper lines instead of one upper and one lower)

Fix the call credit spread ideas to show levels above the stock, not below

5 Okt 2023

Catatan Rilis

Add a 10 period moving average to the indicator with a band around it. The lower band is .97 x the moving average value. The upper band is 1.01 x the moving average value. The moving average length can be changed in the settings and hidden.

This is being added upon change of the strategy and request from current users.