Pearson's R Trend

18 nov. 2024

Pearson's R Trend Indicator

Overview
The Pearson's R Trend Indicator is an advanced technical analysis tool that measures the strength and direction of price trends using statistical correlation. By comparing fast and slow-period Pearson correlation coefficients, this indicator helps identify trend momentum, potential reversals, and overbought/oversold conditions.

Key Features

• Dual timeframe correlation analysis (Fast and Slow periods)
  
• Signal line with crossover alerts
  
• Dynamic histogram for trend visualization
  
• Configurable overbought/oversold levels
  
• Multiple visual components with customizable colors
  
• Comprehensive alert system
  

Technical Details

Core Calculations

• Fast R: Calculates Pearson's correlation coefficient over the faster period (default: 21 periods)
  
• Slow R: Calculates Pearson's correlation coefficient over the slower period (default: 34 periods)
  
• R-Diff: Normalized difference between Fast and Slow R values (range: -1 to 1)
  
• Signal Line: Smoothed average of R-Diff (default: 3-period SMA)
  
• Histogram: Difference between R-Diff and Signal Line
  

Signal Generation

1. Zero Line Crosses
   • Bullish: R-Diff crosses above zero
   • Bearish: R-Diff crosses below zero
   
   
2. Signal Line Crosses
   • Bullish: R-Diff crosses above Signal Line
   • Bearish: R-Diff crosses below Signal Line
   
   
3. Overbought/Oversold Conditions
   • Overbought: R-Diff above 0.45 (default)
   • Oversold: R-Diff below -0.45 (default)
   

Customization Options

Calculation Settings

• Fast Length: Period for fast correlation calculation (default: 21)
  
• Slow Length: Period for slow correlation calculation (default: 34)
  
• Signal Smoothing: Moving average period for signal line (default: 3)
  
• Price Source: Configurable input source (default: close)
  

Visual Settings

• Histogram display toggle
  
• Signal line display toggle
  
• Crossing markers toggle
  
• Line width adjustments
  
• Custom color schemes for bullish/bearish signals
  
• Configurable overbought/oversold levels
  

Interpretation

Bullish Signals

• R-Diff crossing above zero
  
• R-Diff crossing above signal line
  
• R-Diff emerging from oversold territory
  
• Positive histogram expansion
  

Bearish Signals

• R-Diff crossing below zero
  
• R-Diff crossing below signal line
  
• R-Diff dropping from overbought territory
  
• Negative histogram expansion
  

Alert Conditions

• Zero line crosses (both directions)
  
• Signal line crosses (both directions)
  
• Overbought zone entry
  
• Oversold zone entry
  

Best Practices

1. Use multiple timeframe analysis for confirmation
   
2. Combine with volume and price action analysis
   
3. Watch for divergences between R-Diff and price
   
4. Pay attention to histogram momentum changes
   
5. Use overbought/oversold levels as dynamic support/resistance zones
   

Notes

• The indicator uses statistical correlation to measure trend strength
  
• Normalized calculations ensure consistent -1 to 1 range
  
• Built-in alert system for all major signal types
  
• Customizable visual elements for optimal chart analysis
  

Disclaimer
This technical indicator is designed to supplement your trading analysis and should not be used as the sole decision-making tool. Always combine with other forms of analysis and proper risk management techniques.

11 déc. 2024

Notes de version

Removed directional arrows on chart
Displays background color when we have a cross outside the OB/OS conditions