SKT's Volume Weighted Ichimoku Conviction Candle Coloring

Overview

This indicator is a customized, volume-weighted variation of the classic Ichimoku Kinko Hyo system, designed to provide traders with an "at-a-glance" visualization of trend conviction and exhaustion. It overlays dynamic candle coloring on your chart, using a smooth gradient from deep green (strong bullish conviction) to gray (neutral or exhausted) to deep red (strong bearish conviction). The colors are driven by a composite score (-10 to +10, displayed as -100% to +100% strength), which quantifies probabilistic bias based on historical Ichimoku patterns, normalized for volatility and enhanced with volume dynamics.

Unlike standard Ichimoku, this version emphasizes "conviction strength" through gradients, helping identify not just trends but their reliability—e.g., fading colors signal potential reversals or pullbacks. It's particularly suited for trending assets like BTC/USD on daily or higher timeframes, where volume-weighted adjustments make lines hug price action during high-participation moves.

Key Benefits

1. Visual Heat Map: Candles shift colors based on score intensity, making it easy to spot weakening trends (pale shades) or strong continuations (deep shades).
   
2. Exhaustion Detection: Incorporates slope flattening, volume divergences, and cloud thinning to proactively desaturate colors near potential turns.
   
3. Strength Box: A persistent top-right label shows current % strength (e.g., "+75% Bull"), synced to the candle gradient for quick reference.
   
4. Adaptability: Works on any timeframe/asset; inputs allow tuning (e.g., for crypto's 24/7 volatility).
   

How It Works

The indicator computes a conviction score per bar, ranging from -10 (max bearish) to +10 (max bullish), then maps it to candle colors and a % strength display. The score is a weighted sum of five factors (total 100%), each normalized by ATR for scale-invariance:

1. Base: Normalized Price-Cloud Distance (40% Weight): Measures how far price is above (bullish) or below (bearish) the cloud. Calculation: Distance / ATR, clamped via tanh sigmoid for smoothness. Penalty: Fades score if distance <0.5 ATR (approaching cloud edge). Rationale: Large separations historically predict ~60-70% continuation; proximity hints at reversals.
   
2. Cloud Thickness & Color Alignment (15% Weight): Thickness = |Senkou A - B| / ATR; compared to SMA average. Boost if thick (>average: up to +3); penalty if thin (<0.5 average: up to -3). +1 bonus if cloud color aligns (green bull, red bear). Rationale: Thicker clouds act as stronger support/resistance; thinning signals exhaustion.
   
3. Other Lines: Chikou & Tenkan/Kijun Positions (15% Weight): Chikou distance from price/cloud ( / ATR): +4 if aligned far; -0.5 penalty if misaligned. Tenkan-Kijun separation ( / ATR): +3 if diverging (>0.5 ATR). Averaged for contribution. Rationale: Chikou confirms momentum from history; diverging lines indicate strength.
   
4. Exhaustion: Slope Calculation (Tenkan/Kijun) (15% Weight): Avg slope = (Tenkan linreg * 0.7 + Kijun linreg * 0.3) / ATR. Boost if steep (>0.2 abs: +3); penalty if flat (<0.1 abs: -3) or declining in trend (-4). Doubled if lines converging (<0.5 ATR sep). Rationale: Flattening/declining slopes detect fading momentum early.
   
5. Exhaustion: Volume Boost/Penalty (15% Weight): Dynamic thresholds: High = SMA(vol) + STD; Low = max(SMA - STD, 0). Boost if vol > high & slope aligns (up to +3). Penalty if vol < low or slope diverges (up to -3); skipped on new-bar first tick (barstate.isnew). Symmetric clamp: volContrib bounded ±3 to avoid spikes. Rationale: High aligning volume confirms conviction; low/diverging signals traps/exhaustion.
   

Score clamped ±10 overall. Gradients use RGB mixing: Deep colors for high abs(score), desaturated near 0 for smooth fades. Neutral bars vary gray shades by cloud thickness.

Inputs and Customization

All parameters are adjustable via TradingView's indicator settings:

1. Tenkan/Kijun/Senkou B Periods (9/26/52): Standard Ichimoku lengths; increase for smoother lines on volatile assets.
   
2. Displacement (26): Cloud shift; tweak for forward projection.
   
3. ATR Length (14): Volatility normalizer; longer for less sensitivity.
   
4. Slope/Volume/Thickness Lookbacks (5/20/20): Periods for slopes, vol SMA/STD, cloud avg—balance responsiveness vs. noise.
   
5. Scale Factor (2.0): Controls sigmoid clamping sharpness; lower for more gradual scores.
   

For BTC/USD: Try 20/60/120 periods on 1H/4H for crypto's non-stop trading.

Usage Instructions

1. Add to your chart via TradingView's Indicators menu.
   
2. Interpret Gradients: Deep Green: Strong bull (>+70% strength)—ride trends. Pale Green: Weakening bull (~+20-50%)—watch for exhaustion. Gray: Neutral (inside cloud)—avoid directionals. Symmetric for reds (bearish).
   
3. Strength Box: Top-right label shows live % (updates per tick).
   
4. Combine with: RSI/MACD for reversals (e.g., RSI divergence + pale gradient = potential turn).
   
5. Timeframes: Works on all; daily+ for best results. Test settings per asset/TF.
   

Notes and Disclaimer

- Performance: Backtest on your assets—score aligns with ~60% historical continuation in strong trends, but markets are unpredictable.
- Limitations: Volume-sensitive on low-TF or illiquid assets (fixed with clamps/barstate.isnew); no built-in alerts (add via TradingView).
- Disclaimer: For educational purposes only—not financial advice. Past performance ≠ future results; use with risk management.