Smart Color

2022年3月10日

This script color bars to filter the noise.
If the bar color is green, the price is either ranging or going up so we considere that the momentum is for longs
If the bar color is red, the price is either ranging or going down so we considere that the momentum is for shorts

I use this indicator in 3 ways.

• In confirmation with other indicators to get early in a trade. Let's say I see a short divergence and i want to enter only when the momentum is going down. So i will wait that bar color pass to red to enter in a position.
  
• I can also use this indicator alone, but if i do so, since i am more a counter trend trader, i will first wait a lower low with a nice % of variation for the past series of the same color, so when it will change color, there is a higher chance that the price retrace more % and my profit target have more chance to be hit.
  
• And the last way I use this indicator is to exit a position at a "better price". In profit : Let's say i am long and i am fine with the profit i have.Then I decide to put my profit target 0.5% above the actual price. But if the bar color change to red, i will close my trade even if my target is not hit. In loss : Let's say i have a trade with negative PNL and the bar color just changed in my direction. So at the place of taking a loss right now, i will wait the potential little upward, and whenever the barcolor will change again against me, I will close it here. It is just a little optimisation. But the sum of all little optimisation is decent
  

How to parameter this script?
To parameter it you need to understand how it works. If you have too many variation of colors. It means there is too much noise.
There is an input that you can change to filter the level of noise you want to filter. The defval = 5, step = 1 ,minval = 1, maxval =100.
So from defval, up it up to a level in which noise is filtered ; a level in which candle succession of the same color does a nice % variation.