A Multi-Period Price Change Filter for Trend Sentiment

Summary

The indicator estimates trend sentiment by subtracting the latest period's price change from the change over a longer lookback. Its example compares a 12-month change with a one-month change: a positive difference is treated as bullish and a negative one as bearish. A histogram displays the calculated value, with green for positive readings and red for negative readings.

The author presents monthly charts as the intended setting for gauging broad market sentiment, while noting that users can change both lookback periods and apply the idea to shorter timeframes. Signals should be assessed after the latest candle closes. The document offers no backtest or performance evidence, and does not establish that the sign of this difference predicts future returns. The indicator is a directional filter whose usefulness depends on chosen periods, timeframe, and instrument.

Key ideas

• The filter subtracts a shorter-period price change from a longer-period price change.
• A positive result is labeled bullish, and a negative result is labeled bearish.
• The example uses a 12-month lookback and a one-month comparison period.
• The lookback ratio can be changed for other timeframes and applications.
• The latest candle should close before its reading is assessed.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.