Hello everybody,

I have tested a lot of systems and indicators and fell in love with the Ichimoku indicator. I am currently on a mission to quantify trading aspects of the indicator in order to backtest and optimize it.

One of the things that I often read about the Ichimoku indicator is that “it loses its validity in range markets”. What I have done here is to create my own indicator in order to reverse engineer the statement – when the Ichimoku loses its validity, the markets is ranging.

The indicator works as follows:

When both the current and future cloud have the same color, the market is trending, but when there is color changes, the market is ranging. The indicator gives a value of +2 or -2 for bullish or bearish trending respectively. The indicator gives +1 or -1 when the market is bullish or bearish range respectively. A value of 0 indicates chopiness or that the close is in the cloud (do not trade). This indicator serves as a setup indicator – it only shows when to long or short and what strategy to follow and is not intended to be used as entry signals. For example, when the indicator is +1 you have a bullish range setup, and when the RSI(14) is coming out of overbought you have a buy entry. Or if you have a -2 and the RSI(14) crosses down 50 you have a swing trade short entry.  A weakness of the indicator is that it does not allow Kumo breakouts and therefore misses the start of trends. It is good for swing trading and range trading.

I am new to programming and ProRealTime, so I welcome any improvements. Below is the code.

//Ichimoku
Tenkansen = (highest[9](high)+lowest[9](low))/2
Kijunsen = (highest[26](high)+lowest[26](low))/2
SpanA = (tenkansen[26]+kijunsen[26])/2
SpanB = (highest[52](high[26])+lowest[52](low[26]))/2
FutureSpanA = (tenkansen+kijunsen)/2
FutureSpanB = (highest[52](high)+lowest[52](low))/2

//Ichimoku Trend or Range
TrendorRange = 0

if close > SpanA and close > SpanB and SpanA > SpanB and FutureSpanA > FutureSpanB then
 TrendorRange = 2
elsif close < SpanA and close < SpanB and SpanA < SpanB and FutureSpanA < FutureSpanB then
 TrendorRange = -2
elsif close > SpanA and close > SpanB and SpanA < SpanB and FutureSpanA > FutureSpanB then
 TrendorRange = -1
elsif close < SpanA and close < SpanB and SpanA > SpanB and FutureSpanA < FutureSpanB then
 TrendorRange = 1
else
 TrendorRange = 0
endif

BullTrend = 2
BullRange = 1
BearTrend = -2
BearRange = -1
Chopiness = 0


Return TrendorRange as "Trend or Range", BullTrend as "BullTrend", BullRange as "BullRange", BearTrend as "BearTrend", BearRange as "BearRange", Chopiness as "Chopiness"