RMSD Trend [InvestorUnknown]

RMSD Trend is a trend-following indicator that utilizes Root Mean Square Deviation (RMSD) to dynamically construct a volatility-weighted trend channel around a selected moving average. This indicator is designed to enhance signal clarity, minimize noise, and offer quantitative insights into market momentum, ideal for both discretionary and systematic traders.

How It Works
At its core, RMSD Trend calculates a deviation band around a selected moving average using the Root Mean Square Deviation (similar to standard deviation but with squared errors), capturing the magnitude of price dispersion over a user-defined period. The logic is simple:

• When price crosses above the upper deviation band, the market is considered bullish (Risk-ON Long).
  
• When price crosses below the lower deviation band, the market is considered bearish (Risk-ON Short).
  
• If price stays within the band, the market is interpreted as neutral or ranging, offering low-risk decision zones.
  

The indicator also generates trend flips (Long/Short) based on crossovers and crossunders of the price and the RMSD bands, and colors candles accordingly for enhanced visual feedback.


Features

• 7 Moving Average Types: Choose between SMA, EMA, HMA, DEMA, TEMA, RMA, and FRAMA for flexibility.
  
• Customizable Source Input: Use price types like close, hl2, ohlc4, etc.
  
• Volatility-Aware Channel: Adjustable RMSD multiplier determines band width based on volatility.
  
• Smart Coloring: Candles and bands adapt their colors to reflect trend direction (green for bullish, red for bearish).
  
• Intra-bar Repainting Toggle: Option to allow more responsive but repaintable signals.
  
• Speculation Fill Zones: When price exceeds the deviation channel, a semi-transparent fill highlights potential momentum surges.
  

Backtest Mode
Switching to Backtest Mode unlocks a robust suite of simulation features:

• Built-in Equity Curve: Visualizes both strategy equity and Buy & Hold performance.
  
• Trade Metrics Table: Displays the number of trades, win rates, gross profits/losses, and long/short breakdowns.
  
• Performance Metrics Table: Includes key stats like CAGR, drawdown, Sharpe ratio, and more.
  
• Custom Date Range: Set a custom start date for your backtest.
  
• Trade Sizing: Simulate results using position sizing and initial capital settings.
  
• Signal Filters: Choose between Long & Short, Long Only, or Short Only strategies.
  

Alerts
The RMSD Trend includes six built-in alert conditions:

• LONG (RMSD Trend) - Trend flips from Short to Long
  
• SHORT (RMSD Trend) - Trend flips from Long to Short
  
• RISK-ON LONG (RMSD Trend) - Price crosses above upper RMSD band
  
• RISK-OFF LONG (RMSD Trend) - Price falls back below upper RMSD band
  
• RISK-ON SHORT (RMSD Trend) - Price crosses below lower RMSD band
  
• RISK-OFF SHORT (RMSD Trend) - Price rises back above lower RMSD band
  

Use Cases

• Trend Confirmation: Confirms directional bias with RMSD-weighted confidence zones.
  
• Breakout Detection: Highlights moments when price breaks free from historical volatility norms.
  
• Mean Reversion Filtering: Avoids false signals by incorporating RMSD’s volatility sensitivity.
  
• Strategy Development: Backtest your signals or integrate with a broader system for alpha generation.
  

Settings Summary

• Display Mode: Overlay (default) or Backtest Mode
  
• Average Type: Choose from SMA, EMA, HMA, DEMA, etc.
  
• Average Length: Lookback window for moving average
  
• RMSD Multiplier: Band width control based on RMS deviation
  
• Source: Input price source (close, hl2, ohlc4, etc.)
  
• Intra-bar Updating: Real-time updates (may repaint)
  
• Color Bars: Toggle bar coloring by trend direction
  

Disclaimer

• This indicator is provided for educational and informational purposes only. It is not financial advice. Past performance, including backtest results, is not indicative of future results. Use with caution and always test thoroughly before live deployment.