In the beginning, imagine a drunk man goes through a ladder: step by step. Up, up, down, up, down, down, up...
How can we understand which direction he goes? Exactly! We can count the number of steps in each direction. In the above example, in the upward – 4, in the downward – 3. So, it looks like he goes in an upward direction.
The indicator counts the same steps, but for price. The size of each step equals 1 ATR for "DI Length" candles. On the indicator chart, we have the green and red lines. The green line represents a number of steps upward. The red line shows one downward. When the red line upper green, then the price goes below, then the trend is directed down. Later the green line comes above the red one , and then the trend changes the direction to upward. Wow? After that, you can easy detect the trend direction on the market!
But it is still not the end. On the chart, we also have the fat blue line. This is the line, and it represents the power of the trend. It is calculated from a distance between the green and red curves. The line value grows if the distance is increased. If the movement is really powerful, then a number of steps into a direction much more prominent than one in an opposed direction. Then the blue line grows faster. But if the growth has stopped and the blue line turns back or already had changed self-direction, then it is a signal that the trend has ended too. It's an excellent sign to close the position (but not always). Easy? Not quite. Thresholds help you there. The indicator has two additional parameters: upper and lower thresholds to evaluate the trend-over signal strength. An u-turn of the line above the upper threshold sends a strong signal. If one occurs between both thresholds, it is a bit weak signal. But if the blue line goes below the lower threshold, it looks like there is no trend, and the price goes side. We can also say that the price goes side when the value gradually falls down.
The Excellent indicator helps you catch /pullback signals based on green, red, and blue lines. Each such signal is highlighted as a green (buy) or red (sell) dot on the plot. The size of the dot represents the strength of the signal. You can also check the position of green and red lines from each other to determine the trend direction and the place where it has been changed. The Excellent indicator helps you there too. It highlights the trend direction by the background-color, so you'll never miss it! The Excellent good compliance with the indicator built for the same length. You can use them together to be on a trend wave always!
In true TradingView spirit, the author of this script has published it open-source, so traders can understand and verify it. Cheers to the author! You may use it for free, but reuse of this code in a publication is governed by House Rules. You can favorite it to use it on a chart.
But what those Red and Green Dots denote on respective lines.
1. Does the RED Dot on ADX means a downward correction in uptrend so a sell signal?
2. Does the GREEN DOT on ADX means a upward correction in downtrend so a buy signal?
3. And similarly the Green/Red Dot on DMI+ line and Green/Red DOT on DMI- line?
Thanks. The indicator looks great just a little more simple explanation for the addons will be really helpful and amazing :)
In general, each dot has the same meaning as another one. If the dot has a red color, then you need to sell. If the green then buy. But I know that there are many different buy/sell cases, like open/increase/close/close-half position, and I see that you want more details. :)
1. The red dot on the ADX line means that the upward trend has been over. In this case, better to close your short position. If the signal dot is not so large (when the ADX line has turned under the high threshold), it may be better to close just 1/2 of the position. But anyway, be ready to close it totally if you feel that the trend is really finished. If the price movement has a correction character, it mustn't affect the ADX line significantly. But you know that it depends on the correction force. :) Must you open a long position after you see the red dot on the ADX line? I feel no. Better to open one after the red line appears above the green line, and the background color on the chart changed to red.
2. And the same about the green dot on the ADX line. The green dot on the ADX line means that the downward trend has finished. In this case, better to close your long position or it half. Better don't open a short position just after you've seen the green dot on the ADX line. Wait and get a confirmation that the trend direction has changed. For example, you can wait for a case when the green line goes upper the red line, and the background color on the chart changed to green.
3. Small and little dots on DMI+ DMI- lines highlight pullback signals. You can skip them if you want. But there are times when you want to jump into the last car of a departing train... If your case like this, watch pullback signals at the beginning of a new trend movement and open or increase your positions corresponding with the dot color.
But I feel you have mixed up between Short & Longs :)
1. The red dot on the ADX line means that the upward trend has been over. In this case, better to close your short position.
-- Here if the upward trend is over I guess the long entry should be closed.
2. Open a long position after you see the red dot on the ADX line? I feel no. Better to open one after the red line appears above the green line, and the background color on the chart changed to red.
-- I guess once the Red Dot on ADX line appears we need to be ready to open short position and for extra confirmation we can check the DMI red line to appear above green line and back ground goes RED
Similar confusion I can see in your next two points.
I feel it's because of some translation issue from your native language to English. But overall I got what you want to convey and really impressed with this indicator.
Thank you so much for sharing it with the TradingView Community :)
Oh, of course, you're absolutely right! I've accidentally mixed up short and long. Thank you for your care and correction.
I'm sorry for my mistake :) I've slept not enough tonight.