HOW IS IT USED ?
Lambert used the to generate entry and exit signals when the moved above +100% and below -100% respectively. When the moves above +100%, the security enters into a strong uptrend and an entry signal is given. When the moves back below +100% this position should be closed. Conversely, when the moves below -100%, the security enters into a strong downtrend and an exit signal is given. When the moves back above -100% this position should be closed.
In addition, an entry signal is given when the bounces off of the zero line. When the reaches the zero line, the security's average price is at the moving average used to calculate the and when a security bounces off its moving average it is considered a good entry position as the security has pulled back to its short-term support with the bounce reaffirming the current trend.
The can also be used to identify overbought and oversold levels. A security could be considered oversold when the moves below -100 and overbought when it moves above +100. From an oversold level, an entry signal may be given when the moves above -100. From an overbought level, an exit signal might be given when the moves below +100.
Divergences can also be applied to the . A positive divergence below -100 would increase the probability of a signal based on a move above -100, and a negative divergence above +100 would increase the probability of a signal based on a move back below +100.
breaks can be used to generate entry and exit signals. can be drawn connecting the peaks and troughs. From oversold levels, a move above -100 and a breakout could be used as an entry signal. Conversely, from overbought levels, a move below +100 and a breakout could be used as an exit signal.
I added the possibility to add on the chart a 2nd timeframe for confirmation.
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