Levels Of Greed

28 Jan 2022

The Levels Of Greed indicator is based on the same idea as the Levels Of Fear one and was suggested by several traders in the comment section. It helps analyze price advances to find the best levels for closing a long position in an asset after a quick surge or longer up-trend. In finance, volatility is a term that describes the degree of variation of an asset price over time. It is usually denoted by the letter σ (sigma) and estimated as the standard deviation of the asset price or price returns. The Levels Of Greed indicator helps measure the current price advance in the standard deviation units. It plots seven levels at distances of 1, 2, 3, 4, 5, 6, and 7 standard deviations (sigmas) above the base price (the recent lowest price or lower bound of the established range). In what follows, we will refer to these levels as levels of greed.


HOW TO USE

When the price in its surge reaches a certain level of greed, it means that it has surged from its recent lowest value by a corresponding number of standard deviations. The indicator helps traders see the maximum levels to which the price may rise and estimate the potential height of the current surge. Five-seven sigma surges are relatively rare events and correspond to significant market exuberance. Careful traders and shorter-term ones would not want to participate in the bandwagon effect and herd behavior that drive market bubbles. They prefer to take their profits when the market is not exceedingly overbought.


SETTINGS

Window: the averaging window or period of the indicator. The algorithm uses this parameter to calculate the base level and standard deviations. Higher values are better for measuring deeper and longer surges.

Levels Stability: the parameter used in the up-move detection. The higher the value is, the more stable and long the greed levels are, but at the same time, the lag increases. The lower it is, the faster the indicator responds to the price changes, but the greed levels are recalculated more frequently and are less stable. This parameter is mostly for fine-tuning. It does not change the overall picture much.

Mode: the parameter that defines the style for the labels. In the Cool Guys Mode, the indicator displays the labels as emojis. In the Serious Guys Mode, labels show the distance from the base level measured in standard deviation units or sigmas.