Quantitative Kernel Delimiter

28 sept. 2022

Quantitative Kernel Delimiter QKD - aka "Fire and ICE" - is a six-level multiple Kernel regression estimator with cross-timeframe semi-coordinated delimiters (bands) enabled by mathematical validation to our own Kernel regression code with historical Kernel formulas having custom variable bandwidths, mults, and window width – all achieving an advanced alerting system and directional price-action pointers for Novice, Intermediate and Advanced Traders within the TradingView Graphical User Interface.

In the course of our work, we have found that such six delimiters are ideal for generating signals of varying strengths.

99.9% of observations should be in our delimiters' range:


Kernel regression is a nonparametric smoothing method for data modeling.
Kernel regression of statistics was derived independently by Nadaraya and Watson in 1964 with a mathematical foundation given by Parzen’s earlier work on kernel density estimation.

If you are interested in reading more about the mathematical basis of this method from which our code is derived, you can follow these scholarly links:

• Expert Trading Systems: Modeling Financial Markets with Kernel Regression
• Estimation of the bandwidth parameter in Nadaraya-Watson
• Adaptive optimal kernel density estimation for directional data

How kernel regression differs from the other Moving Averages?
In most MA's data points in the specified lookback window are weighted equally. In contrast, the Gaussian Kernel function used in this indicator assigns a higher weight to data points that are closer to the current point. This means that the indicator will react more quickly to changes in the market.

Regression method from which our code is derived is a widely known formula that is laid out in many sources, we used this source:
Kernel regression estimation

Kernel
During the regression counting process, a `kernel function` is used, which is traditionally chosen from a wide variety of symmetric functions.
In this indicator, we use the Gaussian density of statistics as the kernel function.
The Gaussian Kernel is one of the most commonly used Kernel functions and is used extensively in many Machine Learning algorithms due to its general applicability across a wide variety of datasets.
The kernel regression averages all the data contained within the range of the kernel function.
The effective range of the kernel function is defined by its window width.

Kernel Delimiters (Bands / Levels)
This indicator has 6 tailored price range* delimiters:

• Cold / Fire - the furthest delimiters. In a range market when the price enters the cold/fire zones it is assumed that it has deviated strongly from the average and there is a high probability that it will immediately return to the average, or at least into the underlying zone, also in a trending market it signals a change in trend.
  ALERT: the indicator performs best during relatively sideways price action within an established range. The trader must check higher timeframes during hits on the extreme Cold or Fire delimiter bands as a break in the lower, or even higher timeframe price range may result in a need to reset the regression calculation once price velocity calms down after a major move allowing the indicator to best function again. The reset will be done automatically by the indicator’s code. The indicator is not intended for use with unusually aggressive pricing behavior. Always beware of extreme market conditions. The indicator is intended as an ordinary range trading tool.
• Gold / Green - we call it the middle ground / golden mean / happy medium zone. When the price comes out here but the momentum is not enough to get to the higher zone we consider it a good signal.
  
• Pro - most often we receive signals in this area. We call it the professional zone because it is literally the zone for professional traders who know what they are dealing with.
  

*NOTE: the indicator is intended to be used as a range trading tool, and does not protect against total BREAKS from one Range to a new Range, wherein the bands reset for the trader.

Alerts / Labels
We have spent a lot of time implementing and testing signal labels* and alerts**.
Now you have access to an advanced alert system.

*NOTE: DUE TO the ongoing regression calculations performed by our code, the trader will note that a label may change color at a later point in time, or even soon after the hit on the quantitative delimiter band in question. This is a process that was reviewed and is favored to achieve visual clarity over historical accuracy for the trader. Real-time trading hits of price line to band, along with alerts generated, remain accurate. We look forward to receiving feedback on this issue from the end users. Additional revisions by our team on this matter are anticipated if a harmony between visual clarity and historical accuracy is not satisfied.
**NOTE: Smaller and especially micro timeframes will result in more repeated alerts given the tight proximity with price vis-à-vis the quantitative delimiter. Larger timeframes tend to eliminate any issue with repeated alerts aside from obvious re-contacting of the quantitative delimiter by the active price line.

You can turn off alerts you don't need in the indicator settings.
All alerts are set with one click.

Themes
Different people like different things, which is why we decided to make several visual design themes so you can choose what suits you.
Themes will continue to evolve over time.

Pro Theme:


Modern Theme:


How to remove colored text labels next to price scale to maximize screen space on mobile:

• Go to General Chart Settings:
  
• Click on “SCALES”
  
• Un select “Indicators and financial name.”

Dynamic Mode
Projection of Indicator bands on history is subject to repainting due to its regressive calculation nature. Be cautious: old signals are drawn once at the first loading of the chart and by default (to speed up the start-up time of the indicator) correspond to the current regression levels. All labels remain in their places as the chart progresses. Also new, real-time labels appear on the chart, and do not disappear. In order to display the old signals on the chart as they were at the time of their appearance, uncheck the "History labels transition" in the indicator settings (it may increase the initial loading time of the chart but will give you an opportunity to check the alerts you received before and may also be useful for visual backtesting).

Because of the very nature of modeling financial markets (i.e., thousands of data records and perhaps hundreds of candidate predictors), the need for computational speed is paramount.
The use of kernel regression in data modeling for the types of problems associated with financial markets requires careful consideration of computational time.
Once we acknowledge that the order of the data is important, then the choice of the learning-data-set becomes crucial. The time dimension introduces another level of complexity to the analysis: how much importance do we attach to recent data records as opposed to earlier records? Is there a simple way to take this effect into consideration? Common sense leads us to the basic conclusion that if we are to predict a value of Y at a given time, we should only use learning data from an earlier time. But this procedure tends to be overly restrictive. This problem has a simple solution: All that one must do is to make the learning data set dynamic. In other words, once a record has been tested, it is then available for updating the learning data set prior to testing the next record. The analyst can allow the learning data set to grow, or, alternatively, for each record added, the earliest remaining record in the learning set can be discarded. These two alternatives have led us to the necessity of using moving window option and adding a disclaimer that dynamic mode is enabled.

This indicator will be updated frequently based on community feedback see the Author’s instructions below to get instant access

―――――――――――――――――――――
Liability Disclaimer
Never fully rely on one indicator as you trade. Successful trading may require an orchestral mindset and harmonіc blend of trading tools, know-how, and devices. VIP Trader . com is not responsible for any damages or losses incurred by use or misused of this indicator. Neither this description above, nor the indicator, is intended to be used as financial advisory tool, nor to be used without proper education or training in the field of trading.

30 sept. 2022

Notes de version

Fixed

• Accidental disappearance of the signal label