Stochastic T3

https://www.tradingview.com/x/BNtMTLDx/

# **Stochastic T3 Indicator and Its Usage**

## **1. Introduction**
In this presentation, we will examine how the **Tilson T3-filtered Stochastic RSI** indicator works and how it can be applied. Stochastic RSI is used as a **momentum indicator**, and with the Tilson T3 filter, it provides smoother and more accurate signals.

## **2. What is Stochastic RSI?**
Stochastic RSI is an enhanced indicator that applies the Stochastic oscillator to the standard RSI calculation. It allows for a **more precise analysis of overbought and oversold levels**.

## **3. Tilson T3 Filtering**
Tilson T3 uses a **6-layer Exponential Moving Average (EMA)** to analyze price data more smoothly. By using Tilson T3 instead of traditional RSI sources, **more reliable and lower-lag signals** can be obtained.

## **4. Using the Indicator with the 200 EMA**
The 200 EMA (Exponential Moving Average) is one of the most commonly used technical indicators for **determining the direction of long-term trends**. Using **Stochastic T3 alongside the 200 EMA** provides the following advantages:
- **Trading in line with the trend**: If the price is **above the 200 EMA, only buy opportunities**, and if it's below, only sell opportunities should be considered.
- **Fewer false signals**: The 200 EMA filter helps identify the best turning points within the trend.

## **5. Using it with Heiken Ashi Candlestick Charts**
**Heiken Ashi** provides smoother transitions compared to classic candlestick charts and **shows trend direction more clearly**. **When combined with Stochastic T3**, it offers:
- **Better trend identification**: Changes in candle color can align with Stochastic T3 signals in overbought/oversold zones.
- **Cleaner charts**: Heiken Ashi candlesticks filter out unnecessary price fluctuations, making analysis more stable.

## **6. Indicator Code Structure**
The code includes the following steps:
✅ **Tilson T3 calculation** → Provides smoother data.
✅ **Stochastic RSI calculation** → Used for momentum analysis.
✅ **Dotted Band Lines** → **Upper, Middle, and Lower bands** are displayed as dotted lines.
✅ **Background Fill** → A transparent color fill is applied between the 80 and 20 levels.

## **7. Code Example**
```pinescript
//version=6
indicator(title="Stochastic T3", shorttitle="Stochastic T3", format=format.price, precision=2)

smoothK = input.int(3, "K", minval=1)
smoothD = input.int(3, "D", minval=1)
lengthRSI = input.int(14, "RSI Length", minval=1)
lengthStoch = input.int(14, "Stochastic Length", minval=1)
t3Length = input.int(5, "Tilson T3 Length", minval=1) // Tilson T3 length
b = input.float(0.7, "Beta") // Tilson T3 beta parameter

src = input(close, title="RSI Source")
tilsonT3 = ta.ema(ta.ema(ta.ema(ta.ema(ta.ema(ta.ema(src, t3Length), t3Length), t3Length), t3Length), t3Length), t3Length)

rsi1 = ta.rsi(tilsonT3, lengthRSI)
k = ta.sma(ta.stoch(rsi1, rsi1, rsi1, lengthStoch), smoothK)
d = ta.sma(k, smoothD)

plot(k, "K", color=color.rgb(0, 255, 4))
plot(d, "D", color=color.rgb(255, 0, 0))

// Adding dotted lines
line.new(x1=bar_index, y1=80, x2=bar_index+1, y2=80, width=2, color=color.gray, style=line.style_dotted)
line.new(x1=bar_index, y1=50, x2=bar_index+1, y2=50, width=2, color=color.gray, style=line.style_dotted)
line.new(x1=bar_index, y1=20, x2=bar_index+1, y2=20, width=2, color=color.gray, style=line.style_dotted)

// Background fill
bgColor = color.new(color.blue, 90)
fill(line.new(bar_index, 80, bar_index+1, 80), line.new(bar_index, 20, bar_index+1, 20), color=bgColor)
```

## **8. Conclusion**
This indicator generates **more stable signals thanks to the Tilson T3 filter**. **Using it in combination with the 200 EMA** ensures **trend-aligned trading**. When used alongside **Heiken Ashi candlestick charts**, traders can obtain **clearer and less noisy signals**.

🔹 **Advantages**:
- **Fewer false signals**.
- **Trading in the direction of the trend**.
- **Easier-to-read charts**.