Trend Bar Dow Theory V-1.0The indicator is designed to signal the presence of a trend bar with reduced profit-taking the following day. Below, I explain the logic that I have defined for this first version.
The guidelines I provided are as follows: We identify a trend bar, if it sets a market change, between opening and closing, equal to or greater than 50 pips . This first guideline is used to find a day with good liquidity , which usually leads to a trend bar.
If the first guideline is met, the indicator should change the bar color to white . This way, we can proceed to the second guideline, to detect the presence of reduced profit-taking.
The second guideline should indicate the presence of reduced profit-taking, as explained by Dow Theory, to find a trend context with potential to exploit. Therefore, the second guideline involves coloring the bars near the trend bars in grey, if they have a range equal to or less than 30 pips.
Dow Theory states that a market in trend measures reduced profit-taking, within 33%, up to a maximum of 50% compared to the previous trend bar, but I have not yet been able to make Pine Script calculate the percentage value. If you have any suggestions, I would be grateful.
