OPEN-SOURCE SCRIPT
Financial Conditions Traffic Light Indicator
Inspired by TomasonMarkets. Today I am publishing my first Indicator on trading view based on Chicago Fed National Financial Conditions Index (NFCI). The NFCI incorporates 105 financial market indicators, helping gauge whether financial conditions are "tightening" (restrictive) or "loosening" (accommodative).
It is nothing too complex:
Negative RoC of NFCI = loosening conditions = more liquidity = Risk-on
Positive ROC of NFCI = tightening conditions = less liquidity = Risk-off
Additionally:
Using the 28-week Exponential Moving Average (EMA) we identify long-term trends:
NFCI above the EMA: Indicates financial conditions are tight (relative to recent trends).
NFCI below the EMA: Indicates financial conditions are loose. (relative to recent trends).
Strategy logic:
🟢 Risk-on trades (bullish Bitcoin and other high beta assets) when the NFCI has a negative slope AND NFCI is below its 28-week EMA.
🔴 Risk-off trades (bearish Bitcoin and other high beta assets) when the NFCI has a negative slope AND NFCI is above its 28-week EMA.
🟡 Neutral: Happens in two scenarios: NFCI has a negative slope but is above its EMA OR NFCI has a positive slope but is below its EMA.
It is nothing too complex:
Negative RoC of NFCI = loosening conditions = more liquidity = Risk-on
Positive ROC of NFCI = tightening conditions = less liquidity = Risk-off
Additionally:
Using the 28-week Exponential Moving Average (EMA) we identify long-term trends:
NFCI above the EMA: Indicates financial conditions are tight (relative to recent trends).
NFCI below the EMA: Indicates financial conditions are loose. (relative to recent trends).
Strategy logic:
🟢 Risk-on trades (bullish Bitcoin and other high beta assets) when the NFCI has a negative slope AND NFCI is below its 28-week EMA.
🔴 Risk-off trades (bearish Bitcoin and other high beta assets) when the NFCI has a negative slope AND NFCI is above its 28-week EMA.
🟡 Neutral: Happens in two scenarios: NFCI has a negative slope but is above its EMA OR NFCI has a positive slope but is below its EMA.
Open-source script
In true TradingView spirit, the creator of this script has made it open-source, so that traders can review and verify its functionality. Kudos to the author! While you can use it for free, remember that republishing the code is subject to our House Rules.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Open-source script
In true TradingView spirit, the creator of this script has made it open-source, so that traders can review and verify its functionality. Kudos to the author! While you can use it for free, remember that republishing the code is subject to our House Rules.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.