Volume and Price, EMA Hierarchy Scoring Relations V 1.1

15 ธ.ค. 2024

Understanding the Volume and Price, EMA Hierarchy Scoring Indicator

Financial markets are often analyzed through a series of technical indicators, each providing valuable but isolated insights into price movements, volume dynamics, and trends. While these tools are widely used, they often lack context when applied individually. The Volume and Price, EMA Hierarchy Scoring Indicator was developed to bridge this gap by introducing structure, context, and relationships between these known indicators.
By utilizing Exponential Moving Averages (EMAs) and assigning periods derived from prime numbers, this indicator creates a scoring system that evaluates the relative positioning and interaction of 13 widely used technical tools. This approach adds meaning to individual indicator outputs by:

• Revealing how their results align, diverge, or complement each other.
  

• Quantifying their collective behavior through a hierarchy scoring system.
  

• Enabling traders to not only analyze indicators individually but also combine them to uncover how they influence and interact with each other.
  

The result is a tool that provides clarity and insight into market behavior, enabling traders to move beyond surface-level analysis and uncover deeper patterns and relationships within the data.

Key Features and Methodology
The Volume and Price, EMA Hierarchy Scoring Indicator is built on a robust mathematical framework that evaluates and visualizes the relationships between 13 widely used technical indicators. By leveraging Exponential Moving Averages (EMAs) and prime numbers, the indicator provides meaningful insights into individual indicator performance as well as their combined behavior.

1. EMA Hierarchy Scoring


At the core of the indicator is its ability to assess the hierarchy of EMAs for each tool. This hierarchy scoring evaluates how the EMAs are aligned relative to one another, providing traders with a quantifiable measure of the indicator's internal consistency and its alignment with trends.
How It Works:

• Each EMA is assigned a period derived from a unique prime number. This ensures that no two EMAs overlap, preserving their individuality.
  

• The scoring system measures the gaps between these EMAs, assigning weighted values to these relationships based on their position in the hierarchy.
  

Why Prime Numbers?

• Prime numbers ensure that the EMA periods are distinct and mathematically unrelated, creating a structured yet diverse dataset for analysis.
  

• This approach allows the scoring system to capture both short-term and long-term trends, while avoiding redundancy.
  

2. Independent Indicator Evaluation

One of the key features of this indicator is the ability to analyze any of the 13 tools individually. Each indicator has its own module, complete with adjustable parameters and dedicated visualizations:

• Histograms: Represent the raw EMA hierarchy score. Positive bars indicate alignment with upward trends, while negative bars highlight potential reversals or misalignments.
  

• Smoothed Line: Averages the histogram values, reducing short-term noise and emphasizing longer-term trends.
  

• Signal Line: Highlights trend shifts by smoothing the smoothed line further. Crossovers between the smoothed line and the signal line act as actionable signals for traders.
  

3. Combining Indicators for Context
Beyond individual analysis, the indicator allows users to combine multiple indicators to evaluate their interactions. For example:

• Pairing ALMA (price smoothing) with Volume enables traders to see how price trends are supported or contradicted by market activity.
  

• Combining Delta Volume and CMF (Chaikin Money Flow) reveals nuanced dynamics of buying and selling pressure.
  

Number of Combinations

With 13 tools available, the indicator supports "two to the power of thirteen minus one," which equals 8,191possible combinations. This flexibility empowers traders to experiment with various subsets of indicators, tailoring their analysis to specific market conditions or strategies.

Detailed Breakdown of Indicators

The Volume and Price, EMA Hierarchy Scoring Indicator integrates 13 widely used technical indicators, each bringing a unique perspective to market analysis. These indicators are scored individually using the EMA hierarchy system and can also be combined for more comprehensive insights.
Here’s a detailed look at what each indicator contributes:

Price Analysis

1. Arnaud Legoux Moving Average (ALMA):

• Purpose:
  ALMA smooths price data, reducing noise while maintaining responsiveness to trends.
  

• Unique Features:
  The EMA hierarchy scoring highlights how well ALMA’s EMAs align, revealing the strength of price trends.
  Visualization includes a histogram of ALMA scores, a smoothed line, and a signal line.
  

• Settings:
  Adjustable parameters for the window size, offset, and sigma.
  Tooltips guide users on how each setting affects the calculation.
  

• Application:
  Evaluate price momentum or combine with volume-based indicators to validate trends.
  

2. Price Hierarchy Score (PRC):

• Purpose:
  Focuses solely on price behavior to identify consistency and strength.
  

• Visualization:
  Includes a histogram representing raw scores and smoothed and signal lines for trend detection.

• Settings:
  Adjustable EMA periods derived from prime numbers.
  Customizable smoothing and signal periods.
  

Volume Insights

3. Chaikin Money Flow (CMF):

• Purpose:
  Integrates price and volume data to measure capital flow direction and strength.
  
• Visualization:
  Raw CMF hierarchy scores are plotted, alongside smoothed and signal lines for easier trend identification.
  
• Settings:
  Lookback period adjustment for CMF calculation.
  Toggle for enabling/disabling the module.
  
• Application:
  Use alongside Delta Volume to assess buying and selling pressure.
  

Above chart snapshot, in addition to the well-known CMF indicator, the Volume and Price indicator and the EMA Hierarchy Scoring can also be seen in the chart. By enabling the CMF evaluation, you can observe both how the CMF is analyzed and how it aligns with the price chart.

4. Delta Volume:

• Purpose:
  Captures the balance between buying and selling activity in the market.
  
• Visualization:
  A histogram represents the raw divergence in buying and selling strength.
  Signal lines help identify momentum shifts.
  
• Settings:
  Options to set lower timeframes for more granular analysis.
  Adjustable smoothing and signal periods.
  
• Application:
  Combine with CMF for a deeper understanding of capital flow dynamics.
  

In the above chart, alongside the Volume Delta indicator, you can observe our evaluation of this indicator's performance.

In the above chart, as explained, you can observe the impact of our evaluation metrics both individually and in combination with other indicators. This chart featuring VPR (Volume and Price Indicator along with EMA Hierarchy Scoring) illustrates the interplay between CMF and Volume Delta.

5. Volume Hierarchy Score (VOL):

• Purpose:
  Tracks raw volume data to identify areas of heightened market activity.
  
• Visualization:
  Histogram and smoothed lines highlight volume trends.
  
• Settings:
  Prime-numbered EMA periods to analyze volume hierarchy.
  Adjustable smoothing and signal line parameters.
  

In the above chart, as previously explained, by analyzing the EMA of volume data over 25 iterations within specified periods (based on the first 25 prime numbers), you can observe the relationship between volume and price. We are witnessing a price increase, while the current volume position shows significant deviation and instability relative to the EMAs calculated over 25 different time periods.

In the above chart, by simultaneously enabling the evaluation of both volume and price, you can clearly observe the interplay and impact of volume and price in relation to each other.

Momentum and Trend Strength


6. Aroon Up:

• Purpose:
  Evaluates the strength of trends by measuring time since price highs.
  
• Visualization:
  Hierarchy scores plotted as histograms with trend-tracking smoothed and signal lines.
  
• Settings:
  Lookback period adjustments.
  Module toggle for focus on Aroon trends.
  

If the analysis and interpretation of Aroon lines seem somewhat complex, the Volume and Price Indicator along with EMA Hierarchy Scoring provides a clear and intuitive representation of the Aroon indicator in relation to the price chart, as you can see in the current chart.

7. Average Directional Index (ADX):

• Purpose:
  Quantifies the strength of trends, regardless of direction.
  
• Visualization:
  ADX scores and smoothed lines for trend confirmation.
  
• Settings:
  Adjustable directional indicator (DI) and ADX smoothing periods.
  Tooltip guidance for parameter optimization.
  

The simultaneous chart of the well-known ADX indicator alongside the evaluation system of the Volume and Price Indicator with EMA Hierarchy Scoring provides an integrated perspective on the ADX indicator.

8. Elder Force Index (EFI):

• Purpose:
  Combines price and volume to measure the strength of price movements.
  
• Visualization:
  EFI hierarchy scores with clear trend representation through signal and smoothed lines.
  
• Settings:
  Length adjustments for sensitivity control.
  Smoothing and signal line customization.
  

In the above chart, we simultaneously have the well-known EFI indicator and the Volume and Price Indicator along with EMA Hierarchy Scoring. As we progress further, you will become increasingly familiar with the functionality and precision of the Volume and Price Indicator along with EMA Hierarchy Scoring.

Volatility and Oscillators

9. Ehler Fisher Transform:

• Purpose:
  Highlights extreme price movements by transforming price data into a Gaussian distribution.
  
• Visualization:
  Fisher Transform scores with smoothed trend indicators.
  
• Settings:
  Fisher length adjustment.
  Module toggle and smoothing controls.
  

10. McGinley Dynamic (MGD):

• Purpose:
  Tracks price trends while adjusting for volatility, providing a smoother signal.
  
• Visualization:
  Raw MGD hierarchy scores with smoothed and signal lines.
  
• Settings:
  Lookback period customization.
  Adjustable smoothing and signal periods
  

.


Ichimoku Components

11. Conversion Line (ICMC):

• Purpose:
  Captures short-term price equilibrium levels within the Ichimoku framework.
  
• Visualization:
  Short-term hierarchy scores visualized with smoothed lines.
  
• Settings:
  Adjustable conversion line length.
  Tooltips explaining Ichimoku-related insights.
  

12. Base Line (ICMB):

• Purpose:
  Identifies medium-term equilibrium levels in the Ichimoku system.
  
• Visualization:
  Scores and smoothed trend lines for medium-term trends.
  
• Settings:
  Base line period adjustments.
  Tooltip guidance for Ichimoku analysis.
  

In the chart below, to better illustrate the capabilities of the Volume and Price, EMA Hierarchy Scoring relation, we present a chart that evaluates the simultaneous interaction of Ichimoku Base and Conversion lines, Price, Volume, and Delta Volume.



Market Health

13. Money Flow Index (MFI):

• Purpose:
  Detects overbought or oversold conditions using price and volume data.
  
• Visualization:
  MFI hierarchy scores with trend tracking through smoothed and signal lines.
  
• Settings:
  Lookback period customization for sensitivity adjustment.
  Module toggle and visualization controls.
  

EMA of Indicators: A Unified Scoring Metric

The EMA of Indicators module introduces a unique way to aggregate and analyze the individual scores of all 13 indicators. By applying a unified EMA calculation to their hierarchy scores, this module provides a single, combined metric that reflects the overall market sentiment based on the collective behavior of all indicators.

How It Works

1. Indicator-Specific EMAs:
An EMA is calculated for each of the 13 indicator hierarchy scores. The EMA period is adjustable in the settings menu, allowing traders to control how responsive the metric is to recent changes.
2. Combined EMA Calculation:
The individual EMAs are summed and averaged to generate a single Combined EMA Value. This value represents the average performance and alignment of all the indicators.
3. Smoothed and Signal Lines:

• To enhance the interpretability of the Combined EMA Value:

- A Smoothed EMA is calculated using an additional EMA to filter out short-term fluctuations.
- A Signal Line is applied to the Smoothed EMA, providing actionable signals when crossovers occur.

Visualization

The Combined EMA Value is visualized as:

• Histogram Bars: Represent the raw Combined EMA Value, highlighting positive or negative market alignment.
  

• Smoothed Line: Tracks longer-term trends by smoothing the combined value.
  

• Signal Line: Marks potential shifts in market sentiment when it crosses the Smoothed Line.
  

Customization and Settings

The settings menu allows full control over the EMA calculation:

• Enable/Disable Module: Toggle the entire EMA of Indicators functionality.

• Adjust EMA Period: Define the responsiveness of the individual indicator EMAs.

• Set Smoothing Period: Control the degree of smoothing applied to the combined score.

• Signal Line Period: Fine-tune the signal line's sensitivity for detecting trend shifts.
  

Tooltips accompany each parameter, ensuring that users understand their impact on the final visualization.

Applications in Market Analysis

1. Market Health Overview:
Use the Combined EMA Value as a quick snapshot of overall market sentiment based on all 13 indicators.
2. Trend Confirmation:
Analyze crossovers between the Smoothed EMA and Signal Line to confirm market trends or reversals.
3. Flexible Strategy Development:
Adjust EMA and smoothing periods to align the module with short-term or long-term trading strategies.



From EMA Scoring to Divergence-Weighted Insights

While the EMA scoring system provides insights into individual indicators and their trends, the Divergence-Weighted Volatility Adjusted Score takes this analysis further by combining and comparing all 13 indicators into a unified metric.

The Divergence-Weighted Volatility Adjusted Score

This score evaluates how the EMA scores of the 13 indicators interact and diverge, adding a layer of context and collective behavior analysis to the raw hierarchy scores.

1. Normalization:
All EMA scores are scaled to a common range, ensuring comparability regardless of the magnitude of individual indicators.
2. Divergence Analysis:

• The system calculates the average score of the 13 indicators and evaluates the deviation (or divergence) of each individual score from this average.
  

• Indicators with significant divergence are highlighted, as they often signal critical market dynamics.
  

3. Dynamic Weighting:
Indicators with greater divergence are assigned higher weights in the combined score. This ensures that outliers with meaningful signals are emphasized.
4. Volatility Adjustment:
The combined score is adjusted based on market volatility (calculated as the standard deviation of the score over a defined lookback period). This stabilizes the output, making it reliable even during turbulent market conditions.

Visualization and Customization

The Divergence-Weighted Volatility Adjusted Score is plotted as a dynamic line chart, offering a clear visual summary of the collective behavior of all indicators. The chart includes:

• Smoothed Score Line: Filters out noise and emphasizes longer-term trends.
  

• Signal Line: Helps identify potential trend shifts by tracking smoothed score crossovers.
  

Settings:

• Lookback Period: Defines the time frame for volatility calculation.
  
• Smoothing Period: Controls the degree of noise reduction in the smoothed score line.
  
• Signal Line Period: Adjusts the responsiveness of the signal line.
  

These settings are fully adjustable, with tooltips guiding users to understand their impact.

Applications

The Divergence-Weighted Volatility Adjusted Score has several practical applications:
1. Cross-Indicator Alignment:
Detect when multiple indicators align or diverge, signaling potential opportunities or risks.
2. Dynamic Market Insights:
Adapt to changing conditions with the volatility-adjusted scoring.
3. Trend Confirmation:
Use smoothed and signal lines to validate trends identified by individual indicators.



Conclusion

The Volume and Price, EMA Hierarchy Scoring Indicator redefines how traders analyze financial markets. By combining 13 widely used technical tools with a structured scoring system based on Exponential Moving Averages (EMAs) and prime-numbered periods, this indicator brings depth and context to market analysis.
Key features include:

• Independent Analysis: Evaluate individual indicators with precise EMA hierarchy scoring to assess their alignment with market trends.
  
• Dynamic Combinations: Explore the relationships between indicators through over 8,000 combinations to uncover nuanced interactions and patterns.
  
• Divergence-Weighted Scoring: Compare the collective behavior of indicators using a divergence-weighted system, providing a holistic market perspective adjusted for volatility.
  
• Customization: Enable or disable modules, adjust smoothing and signal periods, and fine-tune settings to align the indicator with specific trading strategies.
  
• User-Friendly Visualizations: Intuitive histograms, smoothed lines, and signal lines help traders identify trends, reversals, and market alignment at a glance.
  

This indicator empowers traders to move beyond isolated analysis by creating meaning and context between known tools. Whether you’re a scalper seeking short-term trends or a swing trader analyzing broader market movements, the Volume and Price, EMA Hierarchy Scoring Indicator offers insights tailored to your strategy.

Disclaimer

The Volume and Price, EMA Hierarchy Scoring Indicator is a tool for technical analysis and market evaluation. While it provides structured insights into market behavior, no indicator can guarantee success or eliminate the inherent risks of trading. Market conditions are complex, and multiple factors influence price movements.
Users are advised to:

• Combine this indicator with other analysis methods, such as fundamental analysis or risk management strategies.
  
• Make informed decisions based on their own analysis, trading goals, and risk tolerance.
  

Trading involves significant risk, and past performance does not guarantee future results. Always consult with a financial advisor or professional before making trading decisions.

17 ธ.ค. 2024

เอกสารเผยแพร่

Volume and Price, EMA Hierarchy Scoring Relations V 1.1

To provide a clear and focused starting point for users, only one ability of the script is enabled by default. This allows users to gradually explore and activate the other features based on their needs.