Trend Oscillator from Candle Direction with Hodrick–Prescott Smoothing

Summary

This indicator derives a source signal for each bar by dividing the close-minus-open difference by the high-minus-low range. Its green oscillator aggregates those signed values over a period and divides their sum by the sum of their absolute values, then scales the result by 100. This normalization expresses the balance of directional candle movement relative to total movement over the selected period. The indicator also plots a red Hodrick–Prescott filter line.

The description warns that the filter can redraw, particularly when the redraw period at the beginning of the series is large, and recommends a period of two for more reliable behavior. It supplies formulas but no tested trading rules, parameter study, or return evidence. The oscillator should therefore be treated as an indicator construction rather than a validated strategy. Its output may also be affected by bars with no high-low range, an implementation detail the note does not address; users should confirm behavior and assess signals on their intended data and timeframe.

Key ideas

• Each source value scales the candle’s close-open change by its high-low range.
• The green oscillator compares the sum of signed values with the sum of their absolute values over a period.
• A red Hodrick–Prescott filter line is plotted alongside the oscillator.
• The filter may redraw, and the description recommends a period of two for more reliable results.
• The note provides no tested trading rules or performance evidence.

Tags

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