Price Density Indicator


This is an indicator based on the Price Density concept. Price Density is a quantifiable method of measuring market noise for a certain period of candles.

This indicator also has the option to use relative percentile values which transforms the indicator from an absolute value measure to a percentile based measure so it can be more easily compared across vastly different assets.

We can use Price Density to set rules and only trade particular systems when noise is at an appropriate level. For example, if noise is high then we would want to avoid trend following strategies and instead trade mean-reversion strategies, and vice-versa when the opposite is true. Price Density can also be used to match assets to strategies. Some assets will be naturally more noisy than others and therefore we might have a principle where we only trade those noisy assets with our mean reversion strategies and the more quiet assets with trend following strategies.

Price Density can be used by looking at indicator and seeing how efficiently the indicator line moves from one side to the other. Is it in a straight line? Or are there lots of zigs and zags? The straighter the line, the less market noise there is.


Price Density (Market Noise) by Alejandro P — Indicator by BlueCapitalTrading — TradingView

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