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. The Qstick uses the Simple Moving Average in its calculations. It takes an ‘n’ period moving average of the difference between the closing and opening prices. In case the Qstick indicator shows a reading above zero, this is indicative that the majority of candlesticks during the examined period are bullish, thus, the bias for the trading instrument is bullish.
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 calculation
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.
Extreme levels
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.
Divergence
You can find the price action divergence between indicator and the price and trade in the direction of the indicator.
Qstick indicator trading strategy
The Qstick indicator can produce trading signals at the crossings of the signal line with the zero line. A signal to buy occurs when the signal line crosses above the zero line. That is when there is buying pressure in the market. The selling signal is received when the Qstick falls below zero.
It is also possible to catch divergences with the help of the Qstick indicator. Divergences tell us about possible trend reversal in the near future. Bullish divergence happens when the price is falling but at the same time, the Qstick line is rising. Bearish divergence is when the price is rising but the indicator is moving down.
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
The Qstick indicator is a technical analysis indicator developed by Tushar Chande to numerically identify trends on a price chart. It is calculated by taking an ‘n’ period moving average of the difference between the open and closing prices.
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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