QQE Forex Indicator

The Quantitative Qualitative Estimation (QQE) indicator is based on a a complex calculation of the smoothed RSI indicators. As a result, you will see two lines in a separate indicator window: the fast line and the slow line. There is also a crucial signaling level, usually shown by the indicator at 50. From the settings menu, you can turn on text, sound, and email notifications for this indicator.

This implementation of QQE allows for higher timeframe display, which facilitates multi-time frame analysis. Unlike other indicators, QQE has stood the test of time in terms of changes in volatility, particularly after the terrible global financial crisis of 2008. Moreover, it seldom gives out false signals and has zero lag.

What is the QQE Forex Indicator?

The QQE indicator is made up of two volatility-based trailing levels (fast and slow) and a smoothed Relative Strength Index (RSI).

Calculating the ATR of the smoothed RSI over n-periods and then smoothing the ATR using an extra n-periods Wilders smoothing function yields the Fast Trailing Level (TL) and Slow Trailing Level (TL).

The final Fast and Slow Trailing Levels can be found by adding the Fast and Slow ATR Multipliers to the RSI’s smoothed ATR. The QQE indicator is useful for detecting price overbought and oversold levels and identifying reversals in trends. The QQE indicator functions identically to the RSI. QQE’s main benefit, however, is that it is less prone to false signals than RSI since it is slower and smoother.

QQE Forex Indicator Strategy

The primary function of the QQE indicator is to Identify the direction of an existing trend. QQE is an oscillator that can be used for both direct signaling and divergence analysis. The QQE can be used to produce trade signals through a variety of strategies.

The following are some of the most common strategies:

  • Divergence:

To better anticipate price reversals, it might be helpful to monitor for divergences between the QQE indicator and price. Lower lows in price and higher lows in the QQE are examples of classic bullish divergence, whereas higher highs in price and lower highs in the QQE are examples of classic bearish divergence.

  • Overbought/Oversold Conditions:

The QQE indicator, like the original RSI and other oscillators, can look at price changes to see if they are overbought or oversold. If the QQE is higher than or equal to 70%, the market is considered to be overbought, whereas if it is less than or equal to 30%, it is considered to be oversold. When the RSI, Fast ATR TL, or Slow ATR TL from the QQE system reaches these thresholds, a trade signal is created. A buy signal is generated upon a cross below 30 on the RSI, Fast ATR TL, or Slow ATR TL. Alternatively, a sell signal is sent when either the Relative Strength Index, ATR Time Lag, or ATR Crossover indicators rise over 70.

  • Detect Short-Term Momentum (Crossovers)
    • RSI / Fast ATR TL or Slow ATR TL Crossover: When the RSI crosses above either the Fast ATR TL or the Slow ATR TL, it’s a buy signal and when it moves below either one, it’s a sell signal.
    • RSI / 50-level Crossover: When the (RSI) rises over the 50 mark, a buy signal is generated. Alternatively, a sell signal is sent when the RSI drops below 50.
    • Fast ATR TL / Slow ATR TL Crossover: When the Fast ATR TL rises above the Slow ATR TL, it’s a buy signal, and when it falls below, it’s a sell signal.

For the rest of this post, we’ll use the QQE in a cross-above/below setup to find entry points. One apparent problem with this strategy is that it will lead to a large number of false entries in a range-bound market. Adding the moving average to your charts is something you might consider. Using the MA and the QQE indicator together to trade in the direction of the general trend could help get rid of these false entries.

Buy Signal

QQE Forex Indicator
QQE Forex Indicator Buy Signal
  • Check if the indicator’s green line crosses above the red line.
  • Optionally, also check if the indicator lines are situated in the oversold region (below – 30 level)
  • Once the buy arrow emerges, you could place a buy order at the close of the triggering candle.
  • Place stop loss a few pips below the market’s most recent low.
  • Take profit/exit long anytime a directional arrow in the opposite direction is shown.

Sell Signal

QQE Forex Indicator
QQE Forex Indicator Sell Signal
  • Check if the indicator’s green line crosses below the red line.
  • Optionally, also check if the indicator lines are situated in the oversold region (above + 70 level)
  • Once the sell arrow emerges, you could place a sell order at the close of the triggering candle.
  • Place stop loss a few pips above the market’s most recent high.
  • Take profit/exit long anytime a directional arrow in the opposite direction is shown.

QQE Forex Indicator Pros & Cons

Pros

  • The indicator is used to identify the trend.
  • You can use the indicator to detect oversold and overbought price conditions.
  • The indicator is useful in identifying price and momentum divergence.

Cons

  • The QQE indicator is a little bit slow
  • In ranging markets, trading crossovers will likely generate several false signals.

Conclusion

The QQE indicator provides a variety of strategies for using buy and sell signals. Essentially, it can aid in detecting trend reversals and determining the ideal entry points. The QQE indicator is a valuable addition to any trader’s arsenal. However, try to maintain reasonable expectations. As with any other tool for technical analysis, it can’t give signals that are always right. Thus, this forex indicator sometimes generates erroneous signals. How well it performs largely depends on the state of the market, your trading discipline and money management.