There is a large number of indicators that able to divide trends and flats to a certain degree. This is not very nice when your trading strategy is intended for one market condition only, for example, trend, and is not capable of making a profit when the price moves sideways.
Before reading the article and writing your questions in the comments section, I recommend to watch this video. It’s not long but covers the biggest part of questions on the topic.
QQE indicator belongs to the category of the same algorithm, but it is advantageously distinguished by its reliability and stability, despite the market circumstances. This statement is confirmed by the fact that QQE was successfully used by traders even in 2008.
Qualitative Quantitative Estimation name was chosen by the authors for their algorithm. I will not disassemble this program’s name since there are doubts that it corresponds to reality. Nevertheless, the indicator turned out to be interesting and will be further analyzed in detail.
What is the basis of the QQE indicator algorithm? The authors used the relative strength index and the smoothing method. In general, it is very simple in terms of settings, there’s nothing to twist since there is just one variable – “SF”, of course, if not considering the band’s color or its thickness choice.
As you can see, there is nothing difficult here, it is a curved band, which is rather similar to the standard RSI. By the way, it’s possible to compare both algorithms and see if there are any significant differences between them:
I can say nothing about SF configuration since it looks like RSI. You can try to change the value and see how this impact will affect the indicator’s band. However, further, I will consider the opportunities of Qualitative Quantitative Estimation without changing its settings.
QQE indicator: algorithm application
Why can we use the QQE indicator in Forex trading? The most common method of it using is to obtain signals for opening trades when crossing the bands (both main and signal). In this regard QQE visually can resemble MACD, which is used by some traders in almost the same way.
Qualitative Quantitative Estimation can be included in a fast algorithms list which does not differ by serious delays. For its successful application it is better to take TF = M15 and higher, which will make it possible to obtain a significant profit on trades.
The indicator’s bands change values only by the current candle, which hasn’t still been closed. When the candle closes, but the band values are fixed at the time of the last quote for the candle period and are not changed anymore. How should this be considered in the trading process? It’s necessary to wait for the moment when the candle closes to open trade.
This means it’s impossible to open a trade as soon as the bands intersect but wait until the current candle closes. Only after closing the candle, it’s possible to see if there is a band crossing or not. If not considering the condition of closing the candle, there is a risk to make a mistake – open a trade and the bands will disperse (signal will be lost).
What else can the QQE Forex indicator help with? This program helps to quickly assess the market situation while understanding when there is a flat and trend. There is nothing difficult in this case. Let’s consider three possible options:
- if the indicator band is much higher than the level of 50, there is uptrend;
- if significantly below the level of 50, there is downward;
- if the band fluctuates near level 50 (a little above or below the level), there is a flat in the market.
This data can also be useful in trading, when it is required quickly and, most importantly, to objectively understand the global situation on the market at the moment. At the same time, it is possible to open trades based on completely different from in QQE principles and use its indications for filtering the market state only.
In conclusion I’d like to say that the QQE indicator on Forex is a really useful analytical tool. Its survivability has been verified a long time ago. It is rather resistant to the market changes which was proved both by the period of the financial crisis in 2008 and by further volatility jumps. The algorithm accurately deserves the traders’ attention.