The «Chandelier» Strategy Based On 3 Indicators
Combinations of oscillators, trend, and hybrid indicators are very popular among traders. In certain combinations, tools can reveal their potential in the best possible ways. A template serves as the basis of a large number of strategies.
However, the ultimate effectiveness of the signals depends on the specific type of indicators used, so the combination must be assembled in a competent way. In this article, we will review the «Chandelier» strategy, which is based on two standard indicators and one custom one available on the TradingView (site: https://www.tradingview.com) live chart.
Overview of the indicators
Chandelier Stop is an interesting solution from an active participant in the community of traders. This is a modified version of Chande & Kroll’s Stop. The tool is used to determine stopping points of price movement and reversals, like the Parabolic SAR. Chandelier Stop consists of a set of points connected by a line. Elements are built on top of price bars on the chart, or below them. When the dots are from above, this signals a predominance of downward movement on the market, but if they’re from below, an uptrend is active. The key signal is the point of intersection of the line with the chart.
The name of Bill Williams’ Awesome Oscillator speaks for itself. At the heart of this oscillator are two SMA curves with periods of 34 and 5. The formula takes the value of the larger line from the smaller one, and the result is displayed in the form of a bar graph. The height of the columns indicates the distance between the two SMAs. This is similar to the principle of the MACD; however, if you compare the values of the two indicators, the Awesome Oscillator will show a shorter delay, but its accuracy will be lower. This is typical of all oscillators.
Bollinger Bands Width is a tool that graphically displays the distance between the extreme lines that limit the Bollinger Bands price channel. This indicator shows the level of market volatility. The wider the channel is, the more pronounced the current trend movement is. A contraction indicates a decrease in volatility and attenuation of the trend. The optimal moment to enter the market is the beginning of the widening of the Bollinger Bands.
Preparing for trading on the strategy
The modern approach to online trading is different from Forex. Before, binary options trading and technical analysis were generally carried out in the same program, but now different sites are used for these purposes. Trades are opened on a special trading terminal, and market analysis is carried out with the help of a separate platform that is more adapted for that purpose. The live chart service from TradingView is optimally suited for technical analysis, and for trading any platform from the binary options brokers rating on our site can be used. A good choice for beginners is Binomo (site).
- Open the TradingView site and Binomo (or any other platform) in adjacent tabs of the browser, or put the two windows side by side (for computers with a large screen).
- In each window, we set up the chart the same way – asset, time frame of 1 minute, candlestick mode.
- Three indicators are added to the TradingView chart: Chandelier Stop, Bill Williams Awesome Oscillator, and Bollinger Bands Width. We copy and paste the names into the search line.
- In the settings for Chandelier Stop, we set the red and green fill color for the elements and do the maximum line thickness. In the parameters for the Awesome Oscillator, we change the histogram type to Columns (see the screenshot above).
The last step can be skipped, but the standard settings significantly complicate visual recognition of signals due to the very small size of the elements.
The main indicators in the strategy are Chandelier Stop and Awesome Oscillator, and BBW is used as a price filter.
The signal for an increase – the candlestick chart overtakes the line, as a result of which the fill color changes from red to green. The Awesome Oscillator histogram also crosses the zero border. Confirmation is the beginning of growth in the BBW (Bollinger Bands Width) window.
The signal for a decrease – a change in the color of Chandelier Stop from green to red, the beginning of negative columns building on the histogram of the Awesome Oscillator, and the beginning of widening of the Bollinger channel.
Enter the market on the synchronous signal of the 2 main indicators of the strategy. If Bollinger Bands channel expansion begins on the signal candle, then a trade should be opened in the corresponding direction. The duration of the transaction should be 4-5 candles. On the Binomo platform, the expiration is set immediately before entering the market.