The FTABoll technical indicator is another essential copilot for your trading. As a bottom indicator in the charts, it detects phases, trends and reversals, but also the momentum strength.
An indicator rooted in pure science
A scientific could tell you that one can model the price of a financial asset using ito’s formula:
dz = a(z, t).dt + b(z, t).dW where dz is the price variation, a and b two functions of time and price z, and dW a white noise.
The function a is called the drift. Or, if your prefer, it’s a temporary trend.
If you remove the drift, you get a centered signal: there is no incresae of the price. So, when it is high, comes a time when it go back to a low value. Then one can hypothesize that such prices are periodic.
Now, in mathematics, a periodic signal can be broken down into a sum of sinusoids. It’s the main idea behind the FTABoll indicator!
The following periodic cure…
Is the same thing as the following sinusoids added one to another:
The FTABoll Indicator is built to visually analyze each “frequency” or dimension of this decomposition. But enough with Maths!
What are the components of the FTABoll Indicator ?
The FTABoll technical indicator is made up of 2 lines for the FTA (FTA for Filter TA) and 3 others which constitute an envelope of probable positions.
So, there is an indicateor called Filter TA and its envelope (upper, mid and lower lines).
The FTABoll parameters
Then, how do we analyze the different dimensions? The answer: using different parameters. The FTABoll has only one parameter:
1 (the shortest period), 2, 3, 4 5 (the longest period) and 7 (a mix beetwen long and short).
FTABoll(1) will work on small periods, or high frequencies. FTABoll(5) on big periods or low frequencies.
Watch this video:
Down or uptrend: FTABoll tells it
The FTABoll is an oscillator. It can be positive or negative:
- negative = downtrend
- positifve = uptrend
When the FTA is rising in the positive zone, it means a powerful uptrend.
When it decreases in the negative zone, this is a strong downtrend.
But a drop into the positive zone could be a correction, consolidation or stagnation in an uptrend.
And a drop in the negative zone could be a correction, consolidation or stagnation in an downtrend.
Safe Zone: high probability of rising prices
Now, a Safe Zone is this green area when the FTA is above the midline. It is a zone where the probability of increase is high for this dimension.
The vibrant green area correponds to a period with high momentum. It is where prices move fast.
Sell Zone: high probability of falling prices
Then, a Sell Zone is this pinky area when the FTA is below the midline. It is a zone where the probability of decrease is high for this dimension.
The vibrant green area correponds to a period with high momentum. It is where prices move fast.
Measuring the momentum
Moreover, the FTABoll is able to measure the momentum. The value (on the right axis) if the idnicator is a measure of the momentum. Better, when the FTA rises, it means that the momentum is growing.
Think of a car on the road. The momentum is the speed. When the FTA is goes up, it’s like stepping on the accelerator pedal.
On the contrary, when the indicator does down, it’s like releasing the accelerator pedal. The car is still moving ahead, but its speed decreases. So, the FTA can be positive, decreasing, but the price can continue to go up. It’s rare, but it can happen.
But, generally:
- when the FTA is positive and going up, prices are going up too
- when the FTA is positive and going down, prices are stagnant or consolidate
Conversely, when the FTA is negative:
- when the FTA is going down, prices are going down too
- when the FTA is going up, prices are stagnant or going slightly up.
It seems complicated, but, you’ll quickly find how to master it.
Here is the trick: when the FTABoll are coherent!
As we go further, let’s talk about a little trick. In fact, it’s very important and it will improve your trading.
VERY IMPORTANT:
- when 2 different FTABoll are coherent, you get better probabilities.
- but when there are not coherent, the probabilities are bad.
Let me explain that.
When both FTAboll are rising up in the same time, they are coherent. But when one is going up and the other going down, they are not.
A coherency is a sign of a strong movement:
- up movement when both FTABoll are positive (and going up)
- down movement when they are both negative (and going down).
How to use the FTABoll indicator?
Now, let’s see it in real. Below you’ll find a NVidia chart with FTABoll(2) and FTABoll(5).
The FTABoll(5) is filtering longer periods. You can see it on the chart. There are more oscillations on the FTABoll(2). Now, the most important things to see in this chart are:
- the greater increases in price occur when both FTABoll are in coherence and positive (and high): see on the right on the chart.
- if the FTABoll are going down, the prices tend to going down too, and the decrease is greater when they are negative.
But, now, let’s talk about a special case.
Special use of the FTABoll(1)
As for the FTABoll(1), it is very short term. The FTA (the 2 lines near one another) is much more fluctuating. You can use the hooks they do below or above the lower and upper envelope as respectively buy and sell signals.
There is a lot more to know about the FTABoll indicator. See our strategies pages to learn more.
Where to find the FTABoll indicator ?
You’ll find the FTABoll indicator version for ProRealTime here. And the TradingView version here.
Illustrations : canva & Charts: TradingView