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The Qstick indicator was developed by Tushar Chande and Stanley Kroll in their work “The New Technical Trader” (John Wiley & Sons, New York, 1994, 256 pages). Qstick is a momentum price oscillator, a simple moving average of the difference between the close price and the open price, fluctuating relative to the zero level.
What is the Qstick indicator?
Qstick analyzes the difference in closing and opening prices, like numerical expression of the “candlestick” method:
- When the current closing price is higher than the opening price of today, the buying pressure is fixed
- If the current closing price is less than the opening price of today, the selling pressure is stated.
Like other oscillators, Qstick is interpreted in several ways. The Qstick indicator works more like MACD that indicates the trend based on zero line. If the indicator is above the zero line, it is considered bullish otherwise bearish. However, the Qstick indicator is little different as it also indicates the strength of a trend and when a trend starts weakening.
QStick = [closing price – (opening price X n)] X SMA
While, n = period of time
The QStick simply constructs a simple moving average for n-periods that shows the difference between open and close prices.
QStick = MA (n, (Close – Open)).
Where n is the number of periods for moving average calculation.
How to use the Qstick indicator?
The Qstick indicator can be used to build a trend trading strategy. Indicator values above zero indicate a predominance of bullish candles and a stronger buying pressure over a period of time. This is equal to the length of the moving average compared to selling pressure and vice versa. Indicator values below zero indicate a predominance of bearish candles and a stronger selling pressure over a period of time equal to the length of the moving average. Thus, trading signals are given based on the rule of intersection of the chart with the zero line.
A trend in the Qstick indicator can also be used as a signal generator. The rising trend of Qstick is considered a “bullish” signal, while the falling trend is regarded as a “bearish” signal.
The QStick indicator can effortlessly recognize both oversold and overbought conditions. There are numerous ways to use the Quick stick indicator:
Oversold & Overbought
If the Qstick indicator crosses the zero line to the upside and goes too high, then it is considered overbought. Conversely, if the indicator crosses zero line and goes far below, the it is considered oversold condition.
If the Qstick indicator reaches at extreme low levels and then starts turning to the upside, there is potentially a buy call. On the other hand, when the Qstick indicator reaches at extreme high levels and then starts turning down, there is potentially a selling opportunity.
You can find the price action divergence between indicator and the price and trade in the direction of the indicator.
Qstick indicator trading strategy
Here’s a straightforward trading strategy solely based on the Qstick indicator.
Qstick indicator buy strategy
- The sky-blue bar should appear above the zero line.
- Wait for the bullish bar to appear before entry.
- Place the stop-loss slightly below the swing low.
- We may look to exit when the brown bar appears on the upside extreme.
Qstick indicator sell strategy
- The brown bar should appear below the zero line.
- Wait for the bearish bar to appear before entry.
- Place the stop-loss slightly above the swing high.
- We may look to exit when the sky-blue bar appears on the downside extreme.
Qstick indicator conclusion
Qstick indicator is a momentum oscillator that works in a similar way as the popular MACD indicator. The zero line helps to determine the trend whilst the indicator can also help to determine the strength of a trend.
The Qstick indicator can be used on your trading platform charts to help filter potential trading signals as part of an overall trading strategy.
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