Another little goodie in our toolset is the MTFS_Pulse indicator.
It is not often displayed to avoid clutter, but some users may find it interesting. The logic behind it is quite simple. This adaptive StoK indicator is processed through a filter to bring about turning points in the indicator. (It does not use the complex StoK indicator in the DLL, so it is basically a *free* indicator).
How to use it?
The aggressive trader will look at the white or the brown line whereas the more conservative one will follow the slower green line.
Let's have a look at the various events shown on this screenshot:
(1) White line (WL) turning south. Do we go short? Nope! Never trade against the dominant trend given by the Swing indicator.
(2) Green Line (GL) now also turning south. Swing also turned down: one can sell on the first red bar. It is a sure winner as we are also selling on a strong MM resistance level.
(3) WL turning up. Do we buy? Nope! Main direction is still down, but we know we could think of taking profits.
(4) When WL turned north, cashing in on the short would be in order if not done before. When all 3 lines turn up, and Swing also shows a turnaround, it is time to go long.
(5) What do we do here? The conservative trader may want to take profits. After all, we are again on a strong resistance level. Going short? No way! Swing is still up.
(6) This is a typical "return to the trend" pattern (similar to the bell shape pattern in MTFS). If we have exited early, this is a good time to get back into the market.
(7) Do we sell? Do we go short? NO! Swing is still up. Now again the conservative trader may want to take profit on the first weakening signs (red bar)
(8) Time to go short? Absolutely! Here the more agressive trader will be of course rewarded.
One could now stay short or take profits when the WL starts moving up.
