Momentum explosion pipe
Marks sharp bursts of price change, up or down, when a 0-to-1 momentum score passes 0.8.
The indicator scores each one-minute bar from 0 to 1 on how large, how sudden and how steady recent price change has been. It takes the rate of change over the roc_period lookback, reads the last five of those values, and adds points for their size, the jump in pace on the latest bar, and how steady they are. Volume adds 0.1 for each multiple of its average above 1, and direction plays no part in the score. A marker goes on each bar where the score is above the threshold, 0.8 by default.
How to read it
- Markers on the candles are the signal. At defaults they show on about 1.4 percent of bars, roughly 13 a trading day in the sample.
- Direction comes from the rate-of-change pane below the price: markers fire on sharp falls as well as rises.
- The momentum score pane runs from 0 to 1 and most bars read about 0.2. A marker needs a spike above 0.8.
- Volume factor 1 is average. Most bars read below 1 because heavy bars lift the average; above about 3.5 is the top 5 percent.
What it outputs
- Explosion marker
- Drawn on the candles on each bar where the momentum score is above the threshold. Shows when a burst happens, not which way it goes.
- Momentum score
- A 0-to-1 burst score built from size, pace change, steadiness and volume. The median bar reads about 0.2, and the score is capped at 1.
- Rate of change
- Percent change in price since the close roc_period bars ago, as a fraction: 0.001 is 0.1 percent. Positive is up, negative is down.
- Volume factor
- This bar's volume divided by its average over the last momentum_window bars, including this bar. 1 is average. It cannot exceed momentum_window.
When it fires
A bar where the momentum score beats the threshold: a large, steady rate of change, a sharp change of pace on the latest bar, and volume above average. Rises and falls both qualify.
Settings
- roc_period
- Bars of price change that the score and the rate-of-change line measure. Lower (3 to 5) reacts within minutes and makes both noisier. Higher (30 or more) reads slower, steadier bursts and reacts later.
- momentum_window
- Bars in the volume average behind the volume factor, and the factor's maximum. Higher smooths the average. Lower compares each bar with only the last few. Below 5 the score cannot build, so nothing fires.
- threshold
- The score a bar must beat to get a marker. Near 0.45 it marks about one bar in twenty. Near 0.2 it marks about half the bars. At 1 or above nothing fires, since the score tops out at 1.
Pitfalls
- The signal ignores direction, so a sharp fall marks the same as a sharp rise. Read the rate-of-change pane for which way price is moving.
- Momentum_window does not set the momentum lookback. The score always uses the last five rate-of-change values. Momentum_window only sets the volume average, and below 5 the score stays at 0, so nothing fires.
- The steadiness term rewards small, even rate-of-change values, so quiet, even stretches earn most of its 0.2. Reaching 0.8 needs big moves plus a pace change or a volume spike.