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Ekambit Strength Index (ESI)
Short-term trade indicator.
ESI indicator makes it easy to identify trends and reversals using weighted multi-timeframe comparisons in a single chart.
We at Ekambit Technologies use it daily with consistent success in Indian markets, especially with NIFTY and BANKNIFTY Futures.
Usage
- Above mid-zone & rising: uptrend
- Falling from high-zone: uptrend reversal
- Below mid-zone & falling: downtrend
- Rising from low-zone: downtrend reversal
Apply the same indicator to maximum of 3 correlated instruments to gain greater conviction for your trades, as shown in the chart. In addition to the chart timeframe, 3 configurable higher weighted timeframes are used in ESI computation.
In effect, ESI is a single indicator which can provide an insight of 16 indicators (4 timeframes * 4 instruments).
Inputs
The importance of choosing the correct input symbol(s) and parameters cannot be overstated.
Sample parameters for 1, 5 and 15 minute timeframes is shown below.
In the same way, greater the correlation of the pair symbol (direct or inverse), the better the prediction. Though ESI indicator provides an option for up to 3 additional symbols, just 1 good combination symbol can do wonders in making an accurate trend prediction.
An example of a good pair symbol is shown below. As you can see clearly, though the pair does not correlate as well at the Daily timeframe (lower right bottom), it is highly correlated at the remaining three timeframes: 1-min, 5-min, 15-min, and can be used for intraday trades.
Note: red line is not NSE:INDIAVIX, but a custom combination symbol.
Another example is shown below, where ESI indicator can be used together with EVSI indicator, for greater conviction while entering and exiting trades. The reasoning behind each trade is shown in the charts.
Limitations
- ESI can be applied on any time frame, as shown below. This idea was initiated at 13:30 IST on 29-May-2020 based on ESI. The chart has moved further since, and you can already see its accuracy until market close on 29-May-2020.
- However, longer term movement involves "overnight/weekend" and "event" risks which cannot be predicted using any form of Technical Analysis. This is the reason we are currently developing the Ekambit Comprehensive Index (ECI) indicator.
- So before coming to any conclusions for the longer term as shown in the chart, apply other factors before initiating a trade.
- Based on our backtesting and proven results, ESI is good for the short-term when probability of non-price action risks are lower.
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