Range Sentiment Profile Indicator [LuxAlgo] Trading Strategy

Welcome back Traders: Building a Powerful Trading Strategy with the Range Sentiment Profile Indicator

Welcome back traders! Today, we are going to delve into the world of trading strategies and explore how to build a powerful one using the range sentiment profile indicator. This indicator, inspired by the volume profile, aims to detect trade opportunities in the market by indicating the degree of bullish and bearish variations within equidistant price areas. Let’s dive in and discover how this indicator can help beginners build a consistent and reliable trading strategy.

Understanding the Range Sentiment Profile Indicator

Before we proceed, let’s take a moment to understand the purpose and parameters of the range sentiment profile indicator. By right-clicking on the indicator, we can access its parameter settings. The default settings are recommended for beginners:

• Length: This parameter determines the number of most recent bars used for the calculation of the indicator. The default value is set to 80.
• Rows: This parameter determines the number of price areas the price range is divided into. The default value is set to 20.
• Use Intra Bar: This option uses intra bar data to compute the range sentiment profile. Checking this box activates the option.
• Time Frame: This parameter determines the intra bar data time frame. The default value is set to one minute.

Now that we have a basic understanding of the indicator’s parameters, let’s explore how it works in the market.

How the Range Sentiment Profile Indicator Works

The range sentiment profile indicator highlights the most bullish and bearish price areas through lines extending over the entire range. This tool allows traders to easily determine if a certain price area contains significant bullish or bearish variations. It does this by estimating the accumulation of all the close-to-open variations occurring within a specific profile area.

By analyzing the range sentiment profile, traders can identify areas with alternating signs of bullish and bearish variations, as well as areas with a majority of either bullish or bearish variations alongside a minority of significant opposite variations. These areas can also provide support and resistance levels, making them valuable for trading decisions.

The design of the range sentiment profile is similar to that of a volume profile. First, the maximum and minimum values over the most recent length bars are obtained, defining the calculation range of the profile. The range is then divided into rows of equidistant areas. Whenever the price lies within a specific area, the difference between the closing and opening price for that area is accumulated.

The length of the bin associated with a specific area is determined by the width parameter, which is a percentage of the length setting. A blue range background indicates a majority of bullish variations within each area, while an orange background indicates a majority of bearish variations. Traders can easily identify the areas with the most bullish or bearish price variations by looking at the bullish or bearish maximums.

For intra bar calculations, the range sentiment profile is calculated differently for each candle within the interval. The accumulated close-to-open difference is only considered if the intra bar candle of the user-selected time frame lies within the area. This method can provide more precise results but may require higher computation time.

Using the Range Sentiment Profile Indicator for Trading

Now that we understand how the range sentiment profile indicator works, let’s explore how to use it for trading. We will discuss two scenarios: buying for the continuation of an uptrend and selling for the continuation of a downtrend.

Buying for the Continuation of an Uptrend

1. Watch out for a trending bullish market.
2. Wait patiently for the price to make a bearish pullback in the uptrend.
3. Look for a blue range background color to be formed on the price chart.
4. Watch for a strong bullish close above the bullish bin maximum area.
5. Buy at the close of the strong bullish candlestick above the bullish bin maximum area.
6. Place a stop loss at a distance lower than the swing high or low in the bullish trend.
7. Exit the buy setup whenever the indicator transforms to an orange background color.

Selling for the Continuation of a Downtrend

1. Watch out for a trending bearish market.
2. Wait patiently for the price to make a bullish pullback in the downtrend.
3. Look for an orange background color to be formed on the price chart.
4. Sell at the close of a strong bearish candlestick below the bearish bin maximum area.
5. Place a stop loss at a distance higher than the swing lower high in the bearish trend.
6. Exit the sell setup whenever the indicator transforms to a blue background color.

By following these steps, traders can utilize the range sentiment profile indicator to identify potential trade opportunities and make informed trading decisions.

Conclusion

The range sentiment profile indicator is a powerful tool for traders, especially beginners, looking to build a consistent and reliable trading strategy. By understanding the indicator’s working concepts and implementing it in a trending market, traders can increase their chances of success. Remember, simplicity is key in trading, and the range sentiment profile indicator simplifies the process of identifying bullish and bearish variations within price areas. So, happy trading!

Frequently Asked Questions (FAQs)

Q: What is the range sentiment profile indicator?

The range sentiment profile indicator is inspired by the volume profile and aims to indicate the degree of bullish and bearish variations within equidistant price areas inside the most recent price range. It is a powerful tool for traders to detect trade opportunities in the market.

Q: How does the range sentiment profile indicator work?

The range sentiment profile indicator works by dividing the price range into equidistant areas and accumulating the difference between the closing and opening prices within each area. It then highlights the most bullish and bearish price areas, allowing traders to identify areas with significant variations and potential support or resistance levels.

Q: How can beginners use the range sentiment profile indicator?

Beginners can use the range sentiment profile indicator to build a consistent and reliable trading strategy. By following the steps outlined in the article, beginners can identify trade opportunities in trending markets and make informed trading decisions.

Q: Can the range sentiment profile indicator be used for swing trading?

Yes, the range sentiment profile indicator can be used for swing trading. By analyzing the bullish and bearish variations within price areas, traders can identify potential entry and exit points for swing trades.

Q: What are the advantages of using the range sentiment profile indicator?

The range sentiment profile indicator simplifies the process of identifying bullish and bearish variations within price areas. It provides a visual representation of the most bullish and bearish price areas, allowing traders to make informed trading decisions. Additionally, it can help identify potential support and resistance levels.