The script looks at how far the price is below or above the ichimoku cloud, and publishes an oscillator. Low or high oscillator values are indicative of reversals, to assist with long or short entry decisions.
I'm learning that this oscillator seems to be pretty good in the smaller time frames ... around 1h. It seems clear bottom and top oscillator values can help find local bottom or tops ... so perhaps it's good for scalping opportunities.
MAGICMARK
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You can switch off the lower and upper bound lines to just see the oscillator itself, which compares to the top or bottom of the cloud, depending on whether the price is above or below the cloud ... I believe most reversals come at an oscillator value of 0.5 ... or 3 to 5 on the high side. I still have to backcheck accuracy ... and if I come up with a strategy, I might improve the script to show signals to help consider entering a position.
thomsonraja
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@MAGICMARK, How you got the zigzag and trendlines bro?
MAGICMARK
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@thomsonraja, I should have posted a clean chart. That is from my own chart ... I added the trend lines manually, and it also shows my EW plots.
@thomsonraja, no problem, when I have time, I'm going to try and work on the indicator a bit more, which is the oxcillator at the bottom. My theory is this ... the price ALWAYS comes back to the cloud ... the cloud is like gravity ... if it's above the cloud, the price gets sucked back ... below, it gets sucked back. So, I'm trying to see if there is a way to consider some data to determine when it's too far from the cloud and will likely get sucked back ... and that will be the time to reverse the trade (long to short, or short to long).