MESA Adaptive Moving Average - MTF and Divergence analysis

30 wrz 2020

The latest iteration of the MESA Adaptive Moving Average - rewritten to make use of Pinescript v4 Arrays.

Explanation of settings and example use cases:
Fast Limit: Lower values will reduce the reactivity of the MA to rapid price changes.
-For instance, if you want to ignore price spikes on a low timeframe, then reduce Fast Limit
Slow Limit: Lower values will reduce the reactivity of the MA to slow price changes.
-For instance, if you want the MA to ignore small retracements during a trend, then reduce Slow Limit
Show MESA for next higher timeframe: Display the MA of the next standard timeframe that TV offers.
-[I]Displays 3min if the chart timeframe is 1min. Displays D if the chart timeframe is 4H. Does not work with custom timeframes.
Show MESA for custom higher timeframe: Display a secondary MESA plot with a custom timeframe, selectable via the Custom Timeframe drop-down. Overrides the previous setting, if enabled. This functionality is experimental since it provides a higher sample rate than would normally be available. Take precautions making entries using only Custom Timeframe MESA.
-For instance, you made a decision on the 4H chart using MESA and are now watching the 15min to time a trade entry. Enable and select "4H" from the drop-down menu
Show Divergence between MESA Timeframes: Since divergence can differ greatly between assets, we form a baseline by continuously tracking the difference between the chart MA and higher timeframe MA. We note the maximum divergence in each direction (bullish and bearish). A white circle is plotted when divergence is close to the historical maximum. When a record-breaking divergence occurs, a yellow circle is plotted. You can tweak these indications by adjusting the Divergence Threshold %
-Multi-timeframe divergence is typically a weak indication of trend exhaustion, especially if Volume is not present.
Show Divergence between Source & MESA: Again, divergence can differ greatly between assets. This time, we form a baseline by continuously tracking the difference between the chart MA and Source (usually Close). We note the maximum divergence in each direction (bullish and bearish). A purple triangle is plotted when divergence is close to the historical maximum. When a record-breaking divergence occurs, a lime-green triangle is plotted. You can tweak these indications by adjusting the Divergence Threshold %
-Price divergence is a strong indicator of over-extension. It works well for timing reversals on intraday timeframes.
Source: The input data to perform MESA calculations on.

I've really enjoyed trading with this indicator, especially when combined with my previous two tools:
Empirical Suite: factors Trend, Price momentum, Volume, and Volatility
Squeeze Zone: provides a visual representation of volatility squeezes and attempts to predict breakout directions

Use this indicator to get a sense of overall trend, from any chart timeframe, as well as indications of over-extensions and exhaustion.