Bull and Bear Market '20% Indicator
This indicator uses the somewhat crude method of calculating bear/bull markets using the following popular '20% rule':
A bear market begins when an asset trades 20% below its recent high for more than two months, a bear market ends when an asset trades 20% above its recent low for one month or more.The 1d time-frame should be used, here's why:
"A bear market begins when an asset trades 20% below its recent high for more than two months."So, to capture the mentioned bear and bull market definitions, you'd want to apply the script on a daily (1d/1D) chart.
If we take the standard trading month to be around 20-22 days (excluding weekends), then two months would be approximately 40-44 days. This is why we set the `bearDuration` to 60 days in the script to capture the "more than two months" criteria. Using a daily timeframe, 60 bars represent roughly 3 months (since markets are not open every day due to weekends and holidays).
"...a bear market ends when an asset trades 20% above its recent low for one month or more."
This is why the `bullDuration` is set to 20 days in the script, which represents roughly one trading month on a daily timeframe.