Developing a Creative Technical Indicator
Discussing a New Technical Indicator and Coding it in TradingView
This article discusses one of the indicators of a set called the Rainbow Indicators which are structured and unique combinations of price-derived techniques aimed to help the trader predict reversals or to confirm the on-going trend. The indicator discussed is called the Blue indicator, a contrarian method based on the concept of slopes.
Creating the Blue Indicator
The slope of a time series is the rate of change between the current values and previous values. A rising market will generally have a positive slope until it approaches zero and starts turning negative which coincides with a falling market.
The Blue indicator calculates the slope of the market from a number of periods in the past (by default 14 or 21) and then applies the RSI (by default 14 or 21) on the slope to have a bounded calculation that aim to tell when the slope is losing momentum.
The Blue indicator is used as follows:
A bullish signal is generated whenever the indicator surpasses 30 after having been below it.
A bearish signal is generated whenever the indicator breaks 70 after having been above it.
For simplicity, the indicators of the Rainbow collection are charted in an overlay arrow-based technique where only confirmed signals are shown (as opposed to showing the indicator on its own).
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Coding the Blue Indicator
Pine Script is TradingView’s main coding language which is very user-friendly. We will code this indicator and check out its signals. The next Figure shows the Nifty50 with the signals generated from the indicator.
// This source code is subject to the terms of the Mozilla Public License 2.0 at https://mozilla.org/MPL/2.0/
// © Sofien-Kaabar
//@version=5
indicator("Rainbow Collection - Blue", overlay = true)
lookback = input(defval = 21, title = 'Lookback')
lookback_rsi = input(defval = 21, title = 'RSI Lookback')
slope = (close - close[lookback]) / lookback
indicator = ta.rsi(slope, lookback_rsi)
buy = indicator > 30 and indicator[1] < 30 and indicator < 35
sell = indicator < 70 and indicator[1] > 70 and indicator > 65
plotshape(buy, style = shape.triangleup, color = color.blue, location = location.belowbar, size = size.small)
plotshape(sell, style = shape.triangledown, color = color.blue, location = location.abovebar, size = size.small)The next Figure shows another signal chart on USDCAD.
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