Loom Algo

Loom Algo indicator is a trading tool designed to help identify both trend following opportunities and counter trend ones,


What it does?

Loom Algo combines multiple different types of indicators to produce trend following signals while filtering those signals as much as possible to eradicate low quality ones and avoid taking trend following trades in a choppy market.


How does it work :

The main functionality of this indicator is for it to generate trend following signals based off the STOCHASTIC indicator and then to filter it using different indicators such as the ADX, the McGinley Dynamic, the VWMA, the Kalman Midline, and other ones as well,

The basic way to produce those signals is to look for trend shifts and not for tops or bottoms, so it tries to identify the moments when the trend shifts from bullish to bearish or the opposite based on the Stochastic indicator, but because whenever we have a ranging market we will get choppy and weak signals so here comes to use for filtering indicators such as the ADX as to measure the strength of the trend to verify that we have an actual strong movement before generating a signal, then there is an extra optional layer of filtering with the use of trend following indicators such as the VWMA, so that the indicator would verify that the price has actually started to move in a new direction with momentum and then to generate its signal.

Filtering indicators:
As mentioned earlier i incorporated different indicators within Loom Algo to use as filters for the buy and sell signals to filter out the weak ones as much as possible, each one of them might work differently on different assets and different time frames, so i combined the ones that showed me the best results on different assets and different chart types, and i leave the choice for each user to try the different filtering options on his preferred asset and check the ones that gives the best quality signals for the specific asset, time frame and chart type of the user`s preference.

The colored Volatility bands:
And for the bands the logic is to have a smoothed line that stays with the price in a very smoothed way that first shows the main direction by seeing is the price above or below the midline at the same time the outer bands are made to demonstrate and show mean reversion and counter trend opportunities, so when the price would be extended in one direction it would reach the mid or outer bands and then we can add this to our analysis and understand that there is a higher chance of a reversals at those places,


Summary of features:

• buy and sell signals (not to be followed without additional analysis and good risk management)
  
• Volatility bands to clarify price direction better
  
• Optional Stop loss and Take profit
  
• Filtering options to filter out low quality signals
  
• Optional session filter
  

The Default settings:

The default setting are the best ones i found after testing for Gold, the 5 min chart, and the normal chart candles, as it gives the best results for that asset, the user can change the settings and test as he wishes to find the most suitable set of settings for him,


How to use it?:

Bands settings:

1- Bands Smoothing, is the smoothing of the midline and the the 4 outer bands as they are an identical extension of the midline

2- Bands Distance Type, is the way to calculate the bands distance from the midline whether in percentage or points

3- Outer Band 1 Distance, this is the distance for the first two bands from the midline

4- Outer Band 2 Distance, this is the distance for the second outer two bands from the midline


Signals settings:

1- Filters from 1 to 8 are line indicators that are used as filter so we only take the buy signals when the price is above the filters we turned on or we only take sell signals when the price is under the filters we turned on, and each filter has its own values that we can change

2- ADX filter, this is about turning on or off the ADX filter so we only take trades when the ADX is above certain values to insure that we have a strong trend

3- Momentum type, and Trades speed those are options based of the stochastic indicator to change the frequency of the signals

4- SL and TP, we have both stop loss and take profit options with a choice to turn them on or off, if we turn them off then the indicator is going to close each signal when an opposite signal appears

5- Session filter, this is an option to filter out time, so we can make the indicator only take signals in certain sessions or time spans daily that we choose and it can be turned on or off.



Performance & Testing:
Loom Algo has been back tested with a conservative amount risk per trade, using realistic commission and slippage settings.
While performance may vary based on user settings, the system is designed to adapt to both trending and ranging conditions.



Back testing Settings Used in Preview:
For transparency and realistic expectations, the performance preview of Loom Algo is based on the following strategy settings, chosen to reflect practical trading conditions:

• Initial Capital: $10,000 USD
  
• Position Size: 50% of available equity per trade
  
• Commissions: 0.03% per trade
  
• Slippage: 2 ticks
  

Active Filters:

• Filter1 (On)
  
• Filter2 (On)
  
• ADX Filter (On)
  
• Momentum Type: Fast
  
• Trade Speed: 4
  

Risk Management
Risk controls are enabled to demonstrate realistic position handling:

• Stop Loss: 1% (0.01)
  
• Take Profit: 2% (0.02)
  

Disclaimer: This tool is for educational purposes only. Past performance does not guarantee future results. It does not constitute financial advice or promise of profits.