Price Action Dynamics Oscillator (PADO)

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Price Action Dynamics Oscillator (PADO)
Indicator Overview and Technical Deep Dive
Concept and Philosophy
The Price Action Dynamics Oscillator (PADO) is a sophisticated technical analysis tool designed to provide multi-dimensional insights into market behavior by decomposing price action into manipulation and distribution metrics. The indicator goes beyond traditional momentum or trend indicators by introducing a nuanced approach to understanding market microstructure.
Key Architectural Components
1. Timeframe and Depth Selection

Pivot Depth Options:

Short Term (Length: 12 periods)
Intermediate Term (Length: 20 periods)
Long Term (Length: 100 periods)



This flexible configuration allows traders to adapt the indicator's sensitivity to different market conditions and trading styles.
2. Core Calculation Methodology
Manipulation Metrics

Calculates manipulation differently for green (bullish) and red (bearish) candles
Normalized against Average True Range (ATR) for consistent comparison across different volatility environments
Green Candle Manipulation: (Open - Low) / ATR
Red Candle Manipulation: (High - Open) / ATR

Distribution Metrics

Measures the directional strength and potential momentum shift
Green Candle Distribution: (Close - Open)
Red Candle Distribution: (Open - Close)

3. Normalization and Smoothing

Uses Simple Moving Average (SMA) for smoothing
Dynamic length calculation based on price range distance
Ensures minimum SMA length of 2 to prevent calculation errors

Unique Features
Visualization Toggles
Traders can selectively display:

Manipulation data
Distribution data
Long-term reference lines
Valuation metrics
Strategy signals

Valuation Comparative Analysis

Compares current manipulation and distribution metrics to 1000-bar long-term averages
Color-coded visualization for quick interpretation

Blue: Manipulation above average
Purple: Manipulation below average
Orange: Distribution above average
Yellow: Distribution below average



Strategy Deployment

Generates a composite strategy signal by comparing manipulation and distribution valuations
Uses Exponential Moving Average (EMA) for smoother signal generation
Incorporates volatility bands for context-aware signal interpretation

Quadrant Analysis
Classifies market state into four quadrants based on manipulation and distribution valuations:

Q1: Low Manipulation, High Distribution
Q2: High Manipulation, High Distribution
Q3: Low Manipulation, Low Distribution
Q4: High Manipulation, Low Distribution

Each quadrant is color-coded to provide visual market state representation.
Warning Signals

Manipulation Warning: When strategy crosses below low volatility band
Distribution Warning: When strategy crosses above high volatility band

Visual Indicators

Bar coloration based on strategy momentum
Multiple color states representing different market dynamics

Recommended Use Cases

Intraday and swing trading
Multi-timeframe market analysis
Volatility and momentum assessment
Trend reversal and continuation identification

Potential Limitations

Complexity might require significant trader education
Performance can vary across different market conditions
Requires careful parameter optimization

Recommended Settings

Best used on liquid markets with clear price action
Ideal for:

Forex
Futures
Large-cap stocks
Cryptocurrency pairs



Customization and Optimization
Traders should:

Backtest across multiple assets
Adjust timeframe settings
Calibrate visualization toggles
Use in conjunction with other technical indicators

Licensing

Mozilla Public License 2.0
Open-source and modification-friendly

Conclusion
The PADO represents an advanced approach to market analysis, blending traditional technical analysis with innovative metrics for deeper market understanding.

PADO Quadrant Color Analysis: Deep Dive
Quadrant Color Scheme Breakdown
Quadrant 1: Lime Green Background (RGB: 0, 255, 21, 90)

Condition: val_manip < 1 AND val_distr > 1
Market Interpretation:

Low Manipulation Pressure
High Distribution Activity


Potential Scenario:

Smart money might be gradually distributing positions


Trading Implications:

Caution for current trend followers
Potential preparation for trend change
Increased probability of consolidation or reversal



Quadrant 2: Bright Blue Background (RGB: 0, 191, 255, 90)

Condition: val_manip > 1 AND val_distr > 1
Market Interpretation:

High Manipulation Pressure
High Distribution Activity


Potential Scenario:

Strong institutional involvement
Potential market transition phase
Significant volume and momentum


Trading Implications:

High volatility expected
Increased market uncertainty
Potential for sharp price movements
Requires careful risk management



Quadrant 3: Light Gray Background (RGB: 252, 252, 252, 90)

Condition: val_manip < 1 AND val_distr < 1
Market Interpretation:

Low Manipulation Pressure
Low Distribution Activity


Potential Scenario:

Market consolidation
Reduced institutional activity
Potential low-volatility period


Trading Implications:

Range-bound market
Reduced trading opportunities
Potential setup for future breakout
Ideal for mean reversion strategies



Quadrant 4: Light Yellow Background (Hex: #f6ff0019)

Condition: val_manip > 1 AND val_distr < 1
Market Interpretation:

High Manipulation Pressure
Low Distribution Activity


Potential Scenario:

Accumulation of positions


Trading Implications:

Increased probability of directional move soon



Color Psychology and Technical Significance
Color Selection Rationale

Lime Green (Q1): Represents potential growth and transition
Bright Blue (Q2): Signifies high energy and institutional activity
Light Gray (Q3): Indicates neutrality and consolidation
Transparent Green (Q4): Suggests emerging trend potential

Advanced Interpretation Guidelines
Color Transition Analysis

Observe how the quadrant colors change
Rapid color shifts might indicate:

Market regime changes
Shifts in institutional sentiment
Potential trend acceleration or reversal


Technical Implementation Notes
Calculation Snippet
pinescriptCopyq1 = (val_manip < 1) and (val_distr > 1)
q2 = (val_manip > 1) and (val_distr > 1)
q3 = (val_manip < 1) and (val_distr < 1)
q4 = (val_manip > 1) and (val_distr < 1)

bgcolor(q1 ? color.rgb(0, 255, 21, 90):
q2 ? color.rgb(0, 191, 255, 90):
q3 ? color.rgb(252, 252, 252, 90):
q4 ? #f6ff0019:na)
Alpha Channel (Transparency)

90 and 0x19 values ensure background color doesn't overwhelm chart
Allows underlying price action to remain visible
Subtle visual cue without significant chart obstruction

Practical Trading Recommendations

Never Trade Solely on Quadrant Colors

Use as a complementary analysis tool
Combine with other technical and fundamental indicators


Timeframe Considerations

Validate quadrant signals across multiple timeframes
Longer timeframes provide more reliable signals


Risk Management

Set appropriate stop-loss levels
Use position sizing strategies
Be prepared for false signals



Recommended Workflow

Identify current quadrant
Assess overall market context
Confirm with other indicators
Execute with proper risk management