SpearmanRankCorr indicator
Today, there are dozens of different approaches to market analysis and thousands of indicators based on them.
However, almost all technical indicators have one thing in common - an orientation towards statistics.
One way or another, when using any signal tool, we hope that the situation that previously occurred on the chart will repeat itself again.
Despite this, mathematical and statistical approaches are susceptible to unhealthy criticism from traders.
At the same time, almost no one disputes the graphical analysis (http://time-forex.com/tehanaliz/graf-analiz).
The SpearmanRankCorr indicator is a technical analysis tool that is based on complex mathematical calculations. The basis for constructing the SpearmanRankCorr indicator was the Spearman rank correlation coefficient, which was embodied in the form of a smoothed oscillator.
Installing the SpearmanRankCorr indicator
The script was developed for use in the MT4 trading platform, so in order to use it you will need to download the indicator at the end of the article, and then install it in the trading terminal.
To effectively use the indicator, you must have the maximum amount of historical data on the currency pair. To fill in historical gaps, go to the service menu and select “Quotation Archive” from the list of options that appear. Next, open the tool you need and load data from the minute time frame.
If we talk about installing the indicator in the trading platform, then everything happens in a standard way. First of all, you must gain access to the trading terminal data directory. To do this, open the file menu in your platform and select “Data Directory” from the list of options that appears.
Next, you should find a folder called indicators and drop SpearmanRankCorr into it. In order for MT4 to display the appearance of the script in the list of custom indicators, you must either update the navigator panel or restart the trading platform.
After the update, SpearmanRankCorr will appear in the list of indicators, and in order to use it, just drag the tool onto the chart. If you did everything correctly, you will get a graph like this:
Practical use
The SpearmanRankCorr indicator has many applications, ranging from trend following signals to reversal signals, as well as a major trend filter function.
The first, and it is the most common signal, is based on a change in trend. So, if the indicator line is above the center line – upward trend, and if under the center line – downtrend.
Based on this statement, you should enter the market when trends change, namely, if the indicator line crosses level 0 from bottom to top, we enter a buy position, and if the line crosses level 0 from top to bottom, we enter a sell position. Example:
The second type of signals that our tool gives is based on the divergence properties of all oscillators. Divergence is a reversal signal that marks a trend reversal.
The essence of the signal comes down to the fact that if you observe a price peak on the chart that is higher than the previous one, but the indicator determines it to be lower than the previous one, you should enter a sell position.
If you observe a price depression that is lower than the previous one, and the SpearmanRankCorr indicator displays it as higher than the previous one, you should enter a sell position. An example of divergence is shown below:
The SpearmanRankCorr indicator can also be used as a signal tool based on the moving average principle. To do this, SpearmanRankCorr is added to the SpearmanRankCorr chart with a period of 14 but with a period of 9 and in red.
A buy position is entered when the red line crosses the blue line from bottom to top, and a sell position occurs when the red line crosses the blue line from top to bottom. Example:
In conclusion, it is worth noting that the SpearmanRankCorr indicator can perform many tasks, but its main function is to be a signaling tool.
Also, do not forget that no indicator can give a stable result alone over a long period of time, so it should be used in combination with any trend instrument - http://time-forex.com/indikators?start=11.
Download the SpearmanRankCorr indicator.