When the color is green, it means that at least 4 of 5 conditions are confirming a move upwards, this is when you can take an entry into a trade based on your entry strategy. As the trend continues, the color will eventually change to yellow signaling a divergence. This is when you can use your exit strategy to find a good point to sell. It is wise not to take new positions when the color is trending yellow.
If the color changes from yellow to orange, that is a warning sign that the trend is about to change or has begun to change. Prices may have already fallen. However, sometimes the color will change from yellow back to green signaling a continuation of the trend. You can either keep holding or take a new position in this instance.
When the color is red, this signals fear in the market, you should stay out of the market at first. However, as the market consolidates and the color starts changing back to orange, this is an opportunity to take a long position at a reasonably low price.
(13-Bar) Color Explanation:
The colors change based on 5 market conditions represented in the trend meter.
Green: Strong Uptrend
Yellow: Divergence Present
Trend Meter Explanation:
The trend meter draws 5 arrows indicating or presence.
LL = Lower Lows - Detects when the market is trending with lower lows.
HH = Higher Highs - Detects when the market is trending with higher highs.
MA = Direction - A formula is used to determine the direction of the .
DI = Directional Index - Identifies when upwards momentum is trending.
= - Identifies when the is in an uptrend state.
Note: For advanced users, this indicator has a hidden DMI(4, 4, 4) and (14) indicator used to determine the last two conditions. The Directional Index is based on a DI Plus momentum moving average to determine a momentum trend and the trending over 50 will constitute an uptrend signal as below 50 it will point down.
Trailing stop loss:
The trailing stop loss is determined based on the lowest price of the last 8 bars.
A gray step-line is drawn at the suggested stop activation price.
A red step-line is drawn at the suggested stop limit price.
When the price breaches the trailing stop, a red X will appear below the bar.
You can turn each of these features on or off based on your preference. Happy trading!
-Added option to change location of the trend meter. You can now place it on top or on the bottom.
-Added a grayscale option that turns all but the color coded MA into shades of grey.
Note - Please leave me a comment with any changes you want to see on this indicator. Thanks!
-Removed unused code.
In true TradingView spirit, the author of this script has published it open-source, so traders can understand and verify it. Cheers to the author! You may use it for free, but reuse of this code in a publication is governed by House Rules. You can favorite it to use it on a chart.