The scanner works by calculating the difference between the current market price and two different moving averages, the first of which is based on hourly prices and the second on daily closing prices. The absolute values (delta) are then averaged together. This scanner may help to distinguish between strong and weak trends in individual securities or contracts. In addition to use as an automatic scanner in tradesignal (including tradesignal web edition), the indicator may also be used in tradesignal watchlists.

Programmcode

Conceptual basis

The percentage deviation of a market price to its moving average can be a valuable measure for evaluating trend strength and momentum. Moving-average delta is thus a useful supplement to other methods of analysis.

The indicator first calculates two moving averages, respectively on the basis of hourly and daily closing prices, then calculates the two moving-average deltas to the current price. The moving averages are always calculated through the most recent completed period, i.e. they do not include the currently pending hour or currently pending trading day. These two moving-average deltas are then graphically displayed.

The aim here is to make this indicator as easy as possible to monitor and to make the information provided easy to grasp. For this reason, the graph is displayed without numerical values.

There are four basic trend patterns which may emerge from the average of these two moving-average deltas. If the market diverges from its trend, regardless of direction, the delta (as an absolute value) rises. If the market converges with its trend, the delta falls. If the delta rises over a longer period of time, it must necessarily exceed its own moving average; otherwise, it will be below the moving average.

The table generated for the indicator display this information visually by setting different cell background colours for the four different patterns marked with easy-to-understand labels. An example table is shown in the figure to the right. Here, the colour of the cell (red or green) shows whether the delta is below or above its moving average.

Calculation

For reasons of performance, the trends are first calculated using exponential smoothing using a weighting factor which is entered as a time period.
The daily and hourly moving-average deltas are then averaged together and used to define patterns which may be interpreted as strong or weak trends.

Interpretation

The absolute value of the deviation from the moving average (delta) is a measure of trend strength and momentum. A rising delta suggests that the market is diverging from the trend with significant momentum. Conversely, a falling delta indicates convergence with the trend. Because delta is an absolute value, it does not reflect the direction of these movements. The appearance of a chart with this indicator is shown in the example to the right. The blue areas show the deviation of the current price to the moving average on an hourly basis, while the green areas show the same trend on a daily basis.

The information obtained from this indicator can be readily combined with other analysis methods. Moving-average delta can be a useful filter in searching for strong trends in equity markets, or to search for breakouts following consolidation phases.

Parameters

• Period_Daytrend - Period for moving-average delta based on daily closing prices
• Period_Hourtrend - Period for moving-average delta based on daily hourly prices
• Period_Trigger - Period for averaging the two deltas together