IS Calculation
If you’d like to follow along with the e-book version of the blog, click on the play button in the audio player below (at the bottom of the page).
We Like a Good Mystery
Every so often, we come across an indicator that doesn’t have a lot of history, source information, or even a clear sense of origin. And, that’s okay with us. We look for indicators that perform well and provide accurate signals. Having a deep sense of loyalty to pixels of light, don’t make much sense, and as we’ve discovered, some traders are aggressively defensive of their particular favorite. They refuse to abandon them, even when they’ve discontinued performing well, or never worked in the first place.
Not us…here at Stonehill Forex and No Nonsense Forex. We strive to teach you flexibility, adaptability, and accept change as necessary to grab pips from each trade then move onto the next set-up. No muss, no fuss.
Deep thoughts.
While VP and I were searching for this week’s indicator for the profile series, we dug in and investigated, researched, and tested a few dozen before settling on this particular animal. What caught our attention was the lack of information we could find anywhere else, and seemingly not available on other websites. This may qualify it as a bit of an exclusive. So we thought, “why not?”
Short and Sweet
That being said, this particular indicator was created by an MT4 coder in 2021 and manifests as a two lines cross below chart, confirmation indicator. There are some “chandelier” mentions within the coding, and also appear in the settings. We will take a brief look at the “chandelier” component for further understanding.
Action!
For the data stream, we opted to capture our video the day after the prior blog in an effort to record a different market. We timed it to coincide with the European session into the New York session, as most of the world’s volume is traded during this time. We felt it would provide a great opportunity to see this indicator in action. After watching the video, come back and read the remainder of the blog to see how the indicator performed in our testing.
Once Upon a Time
Don’t forget to send your indicator ideas to our indicator address, stonehillindicator@gmail.com. This past week we received an interesting one with an actual backstory attached to it. The contributor told us about a confirmation indicator, which was part of his algorithm. It wasn’t so much about how much money he made but rather how many bad trades it kept him out of, because not losing can be better than winning; which, coincidentally, happens to be one of the first modules in the advanced course.
Swinging From a Chandelier
We noticed this indicator contained aspects of “chandelier”; which can be found in other indicators. What we’re surmising is that the chandelier coding included in this indicator refers to what Charles Le Beau developed and is based on work by one of our heroes; Alexander Elder by calculating trailing stops based on our favorite indicator (ATR – Average True Range) to keep traders in a trend longer without subjective and impulsive exits. Cool stuff!
Flattering Visuals
We changed the lines from a very unflattering red/green to lime and magenta, then thickened them up for easier viewing for easy signal identification. There is also a “zero” on the right side on the default view to suggest a zero cross, but as this is a two lines cross, we’re ignoring that. Lastly, we REVERSED the colors, meaning red became lime and green became magenta. We’re using our standard white on white candles to keep you focused on the main event…the indicator.
Before we explore the signals, let’s look at the settings.
Settings
There are four variables in the settings screen, of which we use three of them. The last one is just the maximum number of bars the indicator will take into consideration, and 100,000 periods on the daily time frame works out to almost 400 years based on the number of annual trading days, so we’re good on that.
period: The number of periods used to calculate the overall signals. The default value is 10.
nbchandelier: A secondary calculation to help identify trends. The default value is 10.
lag: This variable only affects the red signal line. The higher the number, the slower the reaction and therefore a smoother line. The default value is 0.
Advantages
* Uses secondary calculations (Chandelier) to assist with trend identification.
* Multiple variables provide indicator adjustment control.
* Variable controls give it possibilities as an exit indicator.
Signal Suggestions
Signals were pretty straight forward with respect to entries; however, there were a couple of oddball areas with respect to direction of price and signals. That’s why we strongly advocate a proven algorithm and never, ever, ever try to trade with only one indicator, no matter how amazing it might seem.
How We Use It
Long signal: When the lime green signal line crosses and closes above the magenta signal line. Entry is on the open of the next period.
Short signal: When the magenta signal line crosses and closes below the lime green zero line. Entry is on the open of the next period.
We’ve Got The Tests
If you’re new to these studies, we recommend looking at some of the older blogs to understand how we conduct our testing.
The six pairs we recommend testing are…
EUR/USD
AUD/NZD
EUR/GBP
AUD/CAD
CHF/JPY
CAD/SGD
The markets we test our indicators are the:
EUR/USD (Euro/US Dollar)
BTC/USD (Bitcoin/US Dollar)
XAU/USD (Gold/US Dollar)
SPX500 (S&P500 Index)
Timeframes and Results
We’ll run the IS Calculation indicator on the EUR/USD, BTC/USD, XAU/USD, and the SPX500 using the default and tweaked settings across the daily and 4-hour timeframes on the MT4 strategy tester.
We focus on three metrics;
Total trades
Win/Loss ratio
ROI (return on investment)
Results Make The World Go Around
Below, you’ll find the testing results from our testing efforts.
Get Your Game On
Pretty decent results all the way around, especially on daily BTC and XAU. Of course, the other two markets we tested posted very nice results, which beg to ask; “is this an indicator you’re willing to take a chance on”? Our response is a resounding, “For sure!” After all, we’ve got it for free in the indicator library, and it costs you nothing to get busy with it. Who knows, you may beat our benchmark test results and post some amazing numbers.
Money Management
Money management is based on the NNFX risk profile. That information can be learned in the Advanced Course.
Resources
We’ve made the IS Calculation indicator available for download on our site from the indicator library, for free! When you’re ready to get it, click HERE.
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Our only goal is to make you a better trader.
BTW – Any information communicated by Stonehill Forex Limited is solely for educational purposes. The information contained within the courses and on the website neither constitutes investment advice nor a general recommendation on investments. It is not intended to be and should not be interpreted as investment advice or a general recommendation on investment. Any person who places trades, orders or makes other types of trades and investments etc. is responsible for their own investment decisions and does so at their own risk. It is recommended that any person taking investment decisions consults with an independent financial advisor. Stonehill Forex Limited training courses and blogs are for educational purposes only, not a financial advisory service, and does not give financial advice or make general recommendations on investment.