Cubic Regression with Rainbow Grid (Adaptive StDev)

4 hari lalu

Cubic Regression with Rainbow Channel
Description

The Cubic Regression with Rainbow Channel is an advanced technical analysis tool designed to identify trends and measure market volatility. It plots a cubic regression trendline surrounded by a "rainbow" of quantile bands.

Its primary feature is a unique adaptive volatility model. Instead of using a single period for standard deviation, it blends a long-term (stable) and a short-term (responsive) deviation. The user can control the weight between these two, allowing for fine-tuning of the channel's sensitivity to recent volatility changes.
How to Use and Recommendations

This indicator can be used for trend analysis, volatility assessment, and generating trading signals.

1. Trend Identification:

The central white line represents the calculated cubic regression trend.

Uptrend: The line curves upwards.

Downtrend: The line curves downwards.

Consolidation: The line moves sideways.
The curve's angle indicates the trend's strength.

2. Volatility Analysis:

The width of the rainbow is a direct measure of market volatility.

Wide Channel (High Volatility): Indicates significant price movement and uncertainty. Be cautious, as prices can swing wildly.

Narrow Channel (Low Volatility): Signals a period of consolidation or low market activity. Often, a "squeeze" (a very narrow channel) precedes a strong breakout.

3. Trading Signals:

Mean Reversion (Primary Strategy):

Sell Signal: When the price reaches the upper, "hot" bands (yellow, orange, red), it is considered overbought or overextended. Look for a potential reversal back towards the central white line.

Buy Signal: When the price touches the lower, "cold" bands (aqua, navy, purple), it is considered oversold. Look for a potential bounce back towards the central trendline.

Breakout Confirmation:

If the price consistently closes outside the outer bands (red or purple), especially as the channel is widening, it may signal the start of a very strong new trend, invalidating the mean-reversion signal.

4. Key Recommendations:

Always Use Confirmation: Do not use this indicator in isolation. Confirm its signals with other tools like RSI for momentum, MACD for trend confirmation, or Volume analysis.

Tune the Parameters:

Regression Period: Adjust this to fit the character of the asset. A longer period creates a smoother, more stable trendline suitable for long-term analysis. A shorter period makes it more responsive to recent price action.

Short StDev Weight (%): This is the most important setting. Start with a value around 20-40%.

Increase the weight to make the channel react faster to volatility spikes (good for short-term trading).

Decrease the weight for a smoother, more stable channel that filters out market noise (better for trend-following).

Context is King: The indicator is most reliable in markets that tend to revert to a mean. In a very strong, one-directional trend, mean-reversion signals may fail repeatedly.

4 hari lalu

Nota Keluaran

Improved vilibility, settings and customizations.

3 hari lalu

Nota Keluaran

This indicator has been updated with a new key feature and several improvements. A "Historical Extension" has been added, which allows you to project the most recent regression curve back in time over the period it was calculated on. This creates a single, seamless trend line extending from the past into the future forecast. This feature is optional and can be toggled on or off in the settings.

kelmarin

Nota Keluaran

The logic of the calculations for the standard deviations was considerably changed from the standard deviations (form the mean) to the sqrt of the average square deviation from the regression line.
That made the bands more stable and predictable.
The quantile levels were set to:
Quantiles Levels are 75%, 90%, 97%, 99%, 99.9%
That made the intervals more equal.

kelmarin

Nota Keluaran

The scale was changed from linear to logarithmic.
This is more relevant to highly volitile assets like bitcoin.