This indicator is known as the ‘Zero_n0ncense Balance of Power RSI Extremes’ and it is one of the more effective indicators that I have ever used (in terms of its predictive power).
The creation of this indicator relies on a few different principles.
Principle #1
At a base level, the Balance of Power indicator was used. This indicator is typically utilized in order to gauge underlying price sentiment. However, it does so in a way that is much more sensitive to future price movements than regular RSI is and the way that it tracks price movements makes it much more ‘predictive’ in nature than the RSI as well.
However, the main problem with the Balance of Power is that the regular indicator is fairly unreadable.
Below is an example of what the indicator looks like in live time:
As you can see above, the usefulness of this indicator is diluted significantly by the difficulty in interpreting the signals that the indicator produces.
Normally it oscillates between the values of 0 and 1, with 1 representing an extreme in buying power and 0 representing an extreme in selling power.
But, this is of no use in the way its presented because one cannot see the underlying trend in the data.
That’s where this indicator comes in.
Principle #2
We adjusted the Balance of Power so that we could track its momentum over time (hence the RSI portion of the name). We then overlaid an actual RSI chart behind it, using classical oversold and overbought markings in the same way that you would do with the regular RSI.
The chart is printed here once again for the benefit of the viewer.
Principle #3
Using additional indicators and algorithms, we were able to ‘smooth’ the Balance of Power while ‘re-scaling’ it to fit on a different scale (no longer 0 to 1), in order to create a much more readable trend.
In addition, we implemented the ‘red’ portion of the indicator in order to signal when the sell and buy pressure have reached an ‘extreme’.
Interpreting the Indicator
When the indicator is to the ‘north’ in the overbought category, that means that the indicator is signaling a ‘strong buy’.
When the indicator line turns red, however, in that overbought portion, that means that there is an impending downturn in the price that is to be expected soon.
Below, we will show some examples:
That same period is reflected in the price movement of Bitcoin as well:
As you can see from the pictures above, the red portion of the indicator was our warning that there would be an impending drop in the price.
It should also be noted that this indicator does not re-paint itself, so these signals are produced in live time.
Best Time Frames
The best time frame for this indicator is on the daily or longer. Using the H8 or longer is preferred.
This is because the price movements on lower time frames are usually substantially more volatile, and thus, the predictive abilities of this indicator are diluted to a certain extent on the lower time frames.
Product Offering
If you're interested in gaining access to this indicator, just shoot a private message over this platform and we can talk.
The creation of this indicator relies on a few different principles.
Principle #1
At a base level, the Balance of Power indicator was used. This indicator is typically utilized in order to gauge underlying price sentiment. However, it does so in a way that is much more sensitive to future price movements than regular RSI is and the way that it tracks price movements makes it much more ‘predictive’ in nature than the RSI as well.
However, the main problem with the Balance of Power is that the regular indicator is fairly unreadable.
Below is an example of what the indicator looks like in live time:
As you can see above, the usefulness of this indicator is diluted significantly by the difficulty in interpreting the signals that the indicator produces.
Normally it oscillates between the values of 0 and 1, with 1 representing an extreme in buying power and 0 representing an extreme in selling power.
But, this is of no use in the way its presented because one cannot see the underlying trend in the data.
That’s where this indicator comes in.
Principle #2
We adjusted the Balance of Power so that we could track its momentum over time (hence the RSI portion of the name). We then overlaid an actual RSI chart behind it, using classical oversold and overbought markings in the same way that you would do with the regular RSI.
The chart is printed here once again for the benefit of the viewer.
Principle #3
Using additional indicators and algorithms, we were able to ‘smooth’ the Balance of Power while ‘re-scaling’ it to fit on a different scale (no longer 0 to 1), in order to create a much more readable trend.
In addition, we implemented the ‘red’ portion of the indicator in order to signal when the sell and buy pressure have reached an ‘extreme’.
Interpreting the Indicator
When the indicator is to the ‘north’ in the overbought category, that means that the indicator is signaling a ‘strong buy’.
When the indicator line turns red, however, in that overbought portion, that means that there is an impending downturn in the price that is to be expected soon.
Below, we will show some examples:
That same period is reflected in the price movement of Bitcoin as well:
As you can see from the pictures above, the red portion of the indicator was our warning that there would be an impending drop in the price.
It should also be noted that this indicator does not re-paint itself, so these signals are produced in live time.
Best Time Frames
The best time frame for this indicator is on the daily or longer. Using the H8 or longer is preferred.
This is because the price movements on lower time frames are usually substantially more volatile, and thus, the predictive abilities of this indicator are diluted to a certain extent on the lower time frames.
Product Offering
If you're interested in gaining access to this indicator, just shoot a private message over this platform and we can talk.
Release Notes:
So, there are a few things I want to cover in this new version of the script that I did not cover originally.
First, let's start off with explaining how this script is supposed to work:
1. This is NOT a signal indicator. Its actually something that's a lot better and more powerful than that as an indicator.
2. The purpose of this indicator is to provide a sophisticated means of assessing ACCUMULATION and DISTRIBUTION phases.
3. This indicator is absolutely amazing at determining accumulation and distribution phases. In fact, it does such a good job at it, I'm upset that I didn't name this thing 'Whale Catcher' to be honest with you.
I made a few changes to the script code itself
1. I made the indicator more reflexive in its calculations of the price. I did this by adjusting the oversold/overbought territories, changing how sensitive the indicator is to the underlying price, and adjusting the RSI periods that are calculated from the BoP.
2. I went back to the drawing board and truly studied the 'essence' of the BoP indicator in order to make this new indicator more accurate and 'to the point'.
First, let's start off with explaining how this script is supposed to work:
1. This is NOT a signal indicator. Its actually something that's a lot better and more powerful than that as an indicator.
2. The purpose of this indicator is to provide a sophisticated means of assessing ACCUMULATION and DISTRIBUTION phases.
3. This indicator is absolutely amazing at determining accumulation and distribution phases. In fact, it does such a good job at it, I'm upset that I didn't name this thing 'Whale Catcher' to be honest with you.
I made a few changes to the script code itself
1. I made the indicator more reflexive in its calculations of the price. I did this by adjusting the oversold/overbought territories, changing how sensitive the indicator is to the underlying price, and adjusting the RSI periods that are calculated from the BoP.
2. I went back to the drawing board and truly studied the 'essence' of the BoP indicator in order to make this new indicator more accurate and 'to the point'.
Release Notes:
9-25-2018 Some updates to maximize the indicator's effectiveness
Telegram = t.me/librehash
Twitter = twitter.com/librehash
Website = librehash.org
GIt = git.librehash.com
Docs = docs.libreahsh.com
Twitter = twitter.com/librehash
Website = librehash.org
GIt = git.librehash.com
Docs = docs.libreahsh.com