Trend Quality Indicator

The Trend Quality Indicator (or Q-indicator) is a tool for trend detection and estimate that uses a two-step filtering process. It calculates and compares cumulative price changes over term-oriented semicycles. The method identifies price movement congestion and trending periods and concentrates on the most relevant trends, evaluating their strength in the process. The indicator is given in two formats: centered oscillator and banded oscillator.

What is the Trend Quality Indicator?

You’ve most likely heard that the trend is your friend. The market, on the other hand, follows a well-established tendency. We know that the market typically moves in an up and down cyclical pattern. As a result, traders’ primary responsibility is to forecast market trends. Fortunately, the Trend Quality Indicator is developed to help traders find and evaluate trends. David Sepiashvili created the trend quality indicator to distinguish between a smooth trend and market noise. The trend quality indicator tracks price movements over time and compares them to market noise.

Setting up the Trend Quality Indicator
Setting up the Trend Quality Indicator

Trend Quality Strategy

The indication is defined by the oscillator, which appears in a separate window on the chart. When the market is up, the indicator rises and becomes green. When the trend is negative, the indicator falls and turns red. When the market trend is strong, it goes dramatically up or down. However, if there is market noise, the indicator will make tiny movements. The market is not trending in this scenario. When the market fluctuates or consolidates, the indicator displays sideways movement.

Buy Signal

The following could be your checklist for a buy trade:

  • When the asset being traded is up trending.
  • When the indicator bars rise and become green.

Once these events occur:

  • You could open a buy position after you confirm your entry with bullish candlestick patterns.
  • You could set your stop loss just below the nearest swing low.
  • You could set your take profit at the nearest resistance zone, or you could exit trade when the indicator bars fall and become red.
  • For good risk management, I would only consider trades with a risk to reward ratio of at least 1:2.
Trend Quality Indicator Buy Setup
Trend Quality Indicator Buy Setup

Sell Signal

The following could be your checklist for a sell trade:

  • When the asset being traded is down trending.
  • When the indicator bars fall and become red.

Once these events occur:

  • You could open a sell position after you confirm your entry with bearish candlestick patterns.
  • You could set your stop loss just above the nearest swing high.
  • You could set your take profit at the nearest support zone, or you could exit trade when the indicator bars rise and become green.
  • For good risk management, I would only consider trades with a risk to reward ratio of at least 1:2.
Trend Quality Indicator Sell Setup
Trend Quality Indicator Sell Setup

Trend Quality Pros & Cons

Pros

  • The Trend Quality Indicator may be used to identify the strength of the prevailing market trend.
  • The indicator tracks price fluctuations over time and links them with market noise.

Cons

  • The Trend Quality Indicator may require some knowledge of price action to use optimally.
  • The indicator colors may sometimes give false signals with respect to trend reversals.

Conclusion

Trend Quality Indicator is a nice tool to have in your trading strategy. Although it does not provide entry or exit indications, it does indicate market trends. In general, when the market price is stable, you may have a chance of catching some good moves. The traders ought to keep their expectations in check and also apply good money management when using the indicator.

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