Min-Max Normalization Trend

2 Mar

Principle

• script is using defined period of last candles
  
• over the period it discovers minimum and maximum values
  
• all the values within the period are normalized to that range
  
• resulting values are in range 0-100
  
• the shown value is average from all the candlestick data, i.e. AVG(OPEN, HIGH, LOW, CLOSE) resulting in more smoothed values which helps to filter out market volatility
  

How to interpret

• if there is a uptrend, the new candle data will be normalized as one of the highest values, around 100
  
• similarly if there is a downtrend, the new candle data will be normalized as one of the lowest values, around 0
  
• to help visualize, there is a configurable threshold for bullish or bearish trends
  
• works well on higher timeframes, e.g. BTC on 1d, but can be used on any timeframe to identify local trends
  
• even though a lookback period of candles is used to define the normalization range, this does not mean that the indicator is lagging - this is because the lookback period only defines the range, but does not influece current value's weight
  

Configuration

• you can configure bullish threshold as well as bearish threshold and respective colors
  
• the range in between is considered sideways
  
• lookback period can be also adjusted