Hodrick-Prescott Filter (YavuzAkbay)The Hodrick-Prescott Filter indicator in Pine Script™ brings an established method from economics into trading by applying the Hodrick-Prescott (HP) filter for trend-cyclical decomposition. This filter is commonly used in economics to separate the trend and cyclical components of time series data. Here, it’s adapted into Pine Script to help traders differentiate long-term trends from short-term price fluctuations, making it easier to interpret market movements.
What This Script Does
Unlike moving averages, which simply smooth the data to approximate a trend, the HP Filter is designed to break down the price into two components: the trend (long-term) and the cycle (short-term fluctuations). While no smoothing method is lag-free, the HP Filter can often react faster to shifts in the trend compared to long moving averages, particularly with an optimized λ value. Moving averages, especially longer ones, tend to lag more as they rely directly on past prices, whereas the HP Filter’s recursive calculation adjusts the trend to minimize this delay.
How It Works
The Hodrick-Prescott filter uses a smoothness parameter (λ) to adjust the degree of smoothness applied to the trend component. The higher the value of λ, the smoother the trend component, which means it will respond less to short-term fluctuations in price. This can be set by the user with the "Smoothness Parameter (λ)" input.
How to Use This Indicator
Trend Identification: The line shows the smoothed trend line, which can help in determining the general direction of the price. If the trend line is pointing upwards, it suggests a bullish trend, and if it's pointing downwards, it indicates a bearish trend.
Cycle Component for Overbought/Oversold Signals: The Hodrick-Prescott Cycle Component indicator can be useful to spot potential reversals or short-term corrections. Large deviations from the zero line in the cycle component may indicate overbought (when cycle is significantly positive) or oversold (when cycle is significantly negative) conditions.
Adjusting λ for Different Market Conditions: Users can adjust the λ parameter based on the type of asset and the desired sensitivity. Lower values of λ make the trend component more responsive to price changes, which is suitable for high-volatility assets or for traders focusing on shorter-term trends. Higher values smooth the trend more, which can be beneficial for long-term trend-following in stable markets or when analyzing weekly/monthly timeframes.
Practical Tips for Traders
Trend Following: Use the trend component to follow the direction of the market. If the trend component is steadily increasing, you may want to look for long opportunities, and vice versa for short opportunities.
Divergence Detection: If the cycle component shows a divergence from price (e.g., price makes a new high, but the cycle component does not), this can be an early warning of a potential reversal.
Sensitivity Testing: Experiment with different λ values to find a balance between smoothness and responsiveness that suits the asset and timeframe you’re analyzing.
Mathematical Background of the HP Filter
The Hodrick-Prescott filter separates a time series 𝑦𝑡 (in this case, price data) into a trend component 𝜏𝑡 and a cyclical component 𝑐𝑡 using this equation: yt=τt+ct.
The goal of the HP filter is to minimize the following objective function:
t=1∑T(y_t−τ_t)^2+λt=2∑T−1((τ_(t+1)−τ_t)−(τ_t−τ_(t−1)))^2
Pine Script Implementation of the HP Filter
In my Pine Script implementation, the HP filter is approximated using a recursive formula for efficiency:
τ_t=(y_t+(λ−1)*τ_(t−1))/λ
Trendtrade
SuperThreeThe SuperThree is a comprehensive technical indicator designed to identify and visualize market trends and counter-trend momentum in trading. It uses a unique color-coding system to represent different market conditions and potential trading opportunities.
Uptrend (Green Fill) : This is indicated by a green fill. An uptrend is a period where prices are increasing overall, suggesting a strong market. It’s an ideal time for traders to consider entering long positions or exiting short positions.
Downtrend (Red Fill) : This is represented by a red fill. A downtrend is a period where prices are decreasing overall, indicating a bearish market. Traders might consider entering short positions or exiting long positions during this phase.
Sideways Trend (Blue Fill) : This is shown by a blue fill. A sideways trend, also known as a horizontal trend, is when the price is relatively stable and not making significant upward or downward movements. It’s often a period of consolidation before the price moves up or down.
Counter-Trend Momentum (Blue Arrows) : Blue arrows indicate counter-trend momentum, which can be a signal to exit trades or look for potential trend reversals. These are crucial points where the market’s momentum is shifting and may be about to move in the opposite direction.
The SuperThree indicator is an enhancement of the Supertrend indicator, providing additional features and visual cues to help traders make informed decisions. However, like all indicators, it should be used in conjunction with other forms of analysis to confirm signals and avoid potential false positives. Always consider your risk tolerance and investment goals before making trading decisions.
Happy trading! 😊
Easy RSI Trend - The trend is your friend till the endThis indicator detects the trend for you and keeps you out of choppy markets. It does not give you a signal, rather it tells you for what kind of signals to look for on the top right of the screen: "Only Longs" or "Only Shorts"
If there is no trend or if a trend is overextended (overbought, oversold) it tells you: "No trade allowed"
The indicator does this by scanning the 4h and daily RSI. Both are displayed in a small table in the bottom right of the screen. The upper cell is the 4h RSI and the other the daily RSI value.
AGAIN: This indicator does not give you a signal. It only tells you the direction in which you should trade. It should be used with an indicator or a strategy that gives you a clear signal.
Trend Oscillatorwhat is "Trend Oscillator"?
it is an indicator for determining the trend.
what it does?
analyzes the price action by reducing it to 4 different situations. Red means strong bear, orange means bearish, yellow means weak bull and green means strong bull. It was developed to help traders who trade in the direction of the trend and its biggest promise is to simplify price action.
how it does it?
He defines 4 different situations as follows. If the velocity of the price is positive and the acceleration is positive, it is a strong bull, if the velocity is positive and the acceleration is negative, it is a weak bull, if the velocity is negative and the acceleration is positive, it is a weak bear, if both velocity and acceleration are negative, it is a strong bear.
2 for strong bull
1 for the weak bull
-1 for weak bear
Creates a function that takes values of -2 for the strong bear. this function is the velocity of the principal indicator, and then the integral of this function forms the principal indicator.
how to use it?
"source" is used to change the source of the indicator,
"length" makes the indicator give a later but less signal.
you can use it to follow or analyze the trend. colors make it easy to use. learns about current or past trends by looking at colors. Like any trend indicator, it can give unsuccessful signals in a horizontal trend.
Gann HiLo Activator [CC]The HiLo Activator was created by W.D. Gann and I was surprised to not see more of his technical indicators on here. I will start adding more of his indicators on here if I get more interest. This is the original version of the indicator that performs like a trailing stop that also works well as a trend line. Buy when the line turns green and sell when it turns red.
Let me know if there are any other indicators you want me to publish!
Trend Persistence Rate Indicator [CC]The Trend Persistence Rate Indicator was created by Richard Poster (Stocks and Commodities Feb 2021 pg 12) and this indicator is a good trend strength indicator similar to ADX. A good strategy with this indicator according to the author is to combine this with a moving average crossover strategy and a volatility indicator. Buy when the price crosses over the moving average and when the volatility and this indicator are over a selected minimum. I think 30-40 as a minimum for this indicator works well. Exit that position when this indicator peaks and starts to go down and it should be very profitable for you. I have included general buy and sell signals with this indicator as well.
Let me know if there are any other indicators you would like to see me publish!
