High Probability OS/OB {DCAquant}

11 Jun

DCAquant - High Probability OS/OB
The DCAquant - High Probability OS/OB Pine Script is a sophisticated indicator that provides insights into overbought (OB) and oversold (OS) conditions based on Hull Moving Averages (HMA) and Volume Weighted Moving Averages (VWMA). Here's a detailed breakdown of its functionality:

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THIS INDICATOR IS ONLY WRITTEN FOR BTC, ETH and TOTAL!!!!!!!!!!!!!
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Functionality
The script identifies high-probability OB and OS zones by combining multiple moving averages (MAs).
1. Volume Weighted Moving Average (VWMA)

• The VWMA function computes the VWMA over a specified length, incorporating both the price and volume.
  

2. Hull Moving Average with Volume Weight (HMA-VW)

• The hullma_vw function calculates the HMA using the VWMA. This involves:
  

• Computing VWMAs over the full length and half-length.
  

• Using these VWMAs to derive the HMA-VW through a weighted approach.
  

5. Standard Hull Moving Average (HMA)

• The hull function computes the HMA using the standard weighted moving average (WMA).
  

4. Smoothed HMA-VW

• This is an Exponential Moving Average (EMA) of the HMA-VW to smooth out short-term fluctuations.
  

How this works

• First, the distance between the 2 MA's is calculated.
  

• The distance is scored against the average price of the last 100 days.
  

• By getting this score we can calculate extremes
  

The Extremes are categorized into 4 levels. The transparency of the background color distinguishes these 4 levels.


Only the MOST extremes are plotted ON THE CHART. Within the indicator, all 4 levels are plotted.


Usage

• Extreme Buy zone: Consider entering the market when the indicator shows deep negative values (oversold). These are highlighted with a cyan background, with increasing opacity indicating stronger buy signals (Level 4 Zones).
  

• Extreme Sell Zone: Consider exiting the market when the indicator shows high positive values (overbought). These are highlighted with a magenta background, with increasing opacity indicating stronger sell signals (Level 4 Zones).
  

Disclaimer
This indicator should not be used in isolation. It is recommended to use this as part of a systematic approach, incorporating other tools and analysis methods to confirm signals and make well-informed trading decisions.