Market System Quality Reading
The SQN score is a objective measuring system that gives out a score of the market trend. These scores are categorised as SuperBullish, Bullish, Neutral, Bearish or SuperBearish. If you have found yourself taking the 'not so good' setups, implementing this indicator in your trading rules, you can filter only the SuperBullish stock with proven upward momentum.
HOW TO USE IT
If you are a directional, momentum trader, the Market SQN can give you an unbaised measure of wether you are in an uptrend, sideways or downtrending market.
- Lime = Super Bullish trend
- Green = Bullish trend
- Cyan = Neutral trend
- Dark Red = Bearish trend
- Red = Super Bearish trend
HISTORY AND CREDITS
Developed by Dr . Van Tharp, SQN it is the ratio between the R-expectancy and its standard deviation, multiplied by the square root of the number of trades.
Here is an info of Dr .Tharp's blog post:
Importance of Market Type
A bull market, according to Van Tharp, is one that is trending upward.
A neutral (or sideways) market goes sideways in a range — or even in a wider range if the market is volatile.
A neutral (or sideways) market goes sideways in a range — or even in a wider range if the market is volatile. bear market depreciates.
Market type is merely descriptive and has no predictive value. To put it another way, you'll never know how long it'll endure. To generate money, though, you don't need to forecast. All you need are wins that are larger or more numerous than losses that are smaller or fewer.
Furthermore, when you select a specific market type that fits your time frame and trading style, you can learn a lot about what works and what doesn't. This concept is critical since two important Tharp principles are:
1) It's simple to create a good system that works well in one market type, 2) but expecting that system to operate well in all market types is absurd.
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Link to TradingView script
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