Fluid Dynamics-Inspired Indicator with Bidirectional Scaling

22 oct.

The "Enhanced Fluid Dynamics-Inspired Indicator with Bidirectional Scaling" is a sophisticated technical analysis tool that draws inspiration from the principles of fluid dynamics to measure both upward and downward price movements, while also incorporating volatility and momentum into its calculations. The indicator aims to provide traders with a clear understanding of market dynamics by analyzing "streamflow" (price and volume movements) in both directions, enhanced with adaptive scaling techniques.

Key Features:

Bidirectional Price Momentum:

The indicator separately calculates positive and negative momentum using the price's rate of change. This allows for independent analysis of upward and downward price movements, providing a balanced view of the market's direction.

Streamflow Model:

The "streamflow" is calculated by multiplying volume flow with price momentum. This approach treats the market as a fluid system, where the momentum and volume of trades influence the flow of prices in both upward and downward directions. Streamflow is calculated independently for each direction.

Adaptive Volatility Scaling:

Volatility is dynamically calculated using the Average True Range (ATR) and is weighted to adjust to varying market conditions. An adaptive logarithmic scaling factor is applied to the volatility to capture the dynamic nature of market environments.

DRMA (Displaced Rolling Moving Average):

The indicator uses the DRMA function to smooth out price and volume data, improving the accuracy of its measurements. This allows the indicator to capture longer-term trends while still being responsive to short-term fluctuations.

Non-Linear Scaling and Normalization:

To ensure that the output values are within a usable range, the indicator employs a sigmoid-based non-linear scaling function. This helps normalize the composite output, making it easier to interpret overbought and oversold conditions.

Visual Representation:

The indicator plots two separate lines for upward and downward market movements, making it easy to distinguish between bullish and bearish trends. Background colors are also used to highlight periods of strong upward or downward momentum, as well as high volatility.

Overbought/Oversold Conditions:

Upper and lower thresholds are used to signal potential overbought and oversold conditions. Alerts are triggered when the market moves into extreme levels, helping traders identify potential entry and exit points.
Usage:

This indicator is designed for traders who are looking for a more nuanced and dynamic tool to measure both bullish and bearish trends. By using bidirectional scaling, it provides clearer signals for market direction, while adaptive volatility and momentum adjustments ensure the indicator responds to different market environments. The alert conditions make it especially useful for timing trades in highly volatile conditions or when price movements reach extreme levels.