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Price Density Index

  • #1
  • First Post: Jul 18, 2008 11:24am Jul 18, 2008 11:24am
Here's an indicator I haven't seen around here. Not sure it can be done for MT4 or not, with the way it handles arrays... but basically it's this.

Input: Number of minutes

Go down to the M1 and loop back thru the input number of minutes, and for every time a price appears within a bar (between high and low, inclusive) you increment a count for that price (within an array). Repeat thru all input bars.

This gives you a count of the number of bars that contained a specific price over the last X minutes (or hours, or however long) allowing you to clearly see areas of congestion for a specific price. For instance an index over 20 would mean a relative area of support or resistance versus an area of 0 or 1, which would indicate practically none.

Use either as an indicator that paints areas based on index (green for low, orange for mid, red for high, whatever) or as use in a trend following system to not take trades while still in a tight range.

Anyone think they're up to the challenge?
  • #2
  • Jul 20, 2008 11:47am Jul 20, 2008 11:47am
Does such a beast exist anywhere else that you're aware of? You're describing an indicator that would paint zones or bands of horizontal S/R, correct? "Strongest" nearer the center of the zones and getting "weaker" as one moves outward (higher/lower)? At least that's what I'm envisioning.
Attached Image (click to enlarge)
Click to Enlarge Name: SR zones.PNG Size: 22 KB
  • #3
  • Jul 20, 2008 2:41pm Jul 20, 2008 2:41pm
This sounds very similar to the market profile, only MP records volume traded at each price.

I'm attaching an indicator that does market profile, it should be easy to modify to make it do what you want.
Attached File(s)
File Type: mq4 level_sensor_116.mq4   4 KB | 815 downloads
  • #4
  • Jul 20, 2008 4:54pm Jul 20, 2008 4:54pm
Quote
Does such a beast exist anywhere else that you're aware of? You're describing an indicator that would paint zones or bands of horizontal S/R, correct? "Strongest" nearer the center of the zones and getting "weaker" as one moves outward (higher/lower)? At least that's what I'm envisioning.

Nod. I'm just not sure how to get MT4 to make it's arrays behave as a hash.

Quote
This sounds very similar to the market profile, only MP records volume traded at each price.

Cool, thanks I'll check it out.
  • #5
  • Jul 21, 2008 10:57am Jul 21, 2008 10:57am
Aren't there other ways to store the values other than in an array? Worst case, couldn't you read/write to an xls or mdb file or something?

I think this could potentially be a very useful indicator.
  • #6
  • Jul 21, 2008 10:46pm Jul 21, 2008 10:46pm
Haven't had a chance to work on this one yet. It has been on my mind and I believe that it will show some interesting insight into the market. Not sure when I can get to it due to other commitments.

What I see for this indicator is one that shows in a seperate window like cci or stochastics. This would give you the ability to look back in history to see if the indicator is providing the needed information.

What I need to know is on previous candles or even the current candle do you want to use the high, low, open, close or maybe a median value of the candle or some other value.
  • #7
  • Jul 21, 2008 10:58pm Jul 21, 2008 10:58pm
magnumfreak is in da house!

I knew there'd be at least one of you guys who'd eventually rise to the challenge!
  • #8
  • Jul 22, 2008 3:55am Jul 22, 2008 3:55am
Opie, yea that rainbow look is how I kind of see it mentally. I'm not sure how to draw that tho, at least not the way I want it. I think I've got the array problem solved tho.

Quote
What I see for this indicator is one that shows in a seperate window like cci or stochastics. This would give you the ability to look back in history to see if the indicator is providing the needed information.

Maybe, but what would you plot that in a window? Remember that we're talking about a diverse set of prices, not just 1, and seeing it overlayed on price data would make it easier to see what prices it refers to. We're basically trying to see areas of congestion on the chart, not just how congested the current price is.

I'm not sure how congestion relates to S/R, but S/R can be done basically the same way. Run a density of 10 or 20 bar lows for support and 10 or 20 bar highs for resistance. I believe that'd work, unless I'm missing something.

Quote
What I need to know is on previous candles or even the current candle do you want to use the high, low, open, close or maybe a median value of the candle or some other value.

All prices from low to high would need to be incremented.
  • #9
  • Jul 22, 2008 4:34am Jul 22, 2008 4:34am
http://www.forexfactory.com/showthread.php?t=80975

Calculation not made in array yet, still a direct write to polygon. Maybe you could modify it.
  • #10
  • Jul 22, 2008 4:51am Jul 22, 2008 4:51am
Hmm, similar... maybe I can use the polygon method.
  • #11
  • Jul 22, 2008 10:31am Jul 22, 2008 10:31am
Interesting. That sideways histogram look appears workable. Thanks, dito. I overlooked that thread.
  • #12
  • Jul 22, 2008 2:01pm Jul 22, 2008 2:01pm
Quoting pippero
This sounds very similar to the market profile, only MP records volume traded at each price.

I'm attaching an indicator that does market profile, it should be easy to modify to make it do what you want.
Thanks for this, looks interesting.
  • #13
  • Aug 30, 2008 8:14am Aug 30, 2008 8:14am
This is very interesting, let's see if there's a coder around that's able to put this strategy together...
  • #14
  • Aug 31, 2008 8:52am Aug 31, 2008 8:52am
The easiest way to do this would have to be some sort of 2 dimensional matrix.

One axis is for Price, the other for "Hit count"

Here's how I would conceptualize this indicator:

 

  1. Find the range of prices within a specific amount of bars. (Let's say 200)
  2. For each price point, add 1 for every bar where the price point falls between the high and low.
  3. Draw a specifically colored line for each price point.

I can do just about all of the coding except array work.

  • #15
  • Aug 31, 2008 10:57am Aug 31, 2008 10:57am
Why the problem with the arrays ? If I understand the first post correctly, apply the following pseudo code

1) Define (or calculate) the upper and lower limts of the price range your interested in.
EG upper = 1.8600
lower = 1.8500

2) define (or dictate) the granularity of bands your interested in.
EG bandwidth= 10 (pips)

3) calculate the number of bands in your range
nbands = ((upper-lower)/Point) /bandwidth

4) size a dynamic array to store the counts

int bandsarray[][1]
arrayresize(bandsarray,10);


5) initialise array
for x = 0 to 9 bandsarray[x][0] = 0;


6) loop through and total into the array

barpos = ????
/// iterate bars
while barpos >= 0
{
bandpos =0;
/// iterate bands
while bandpos < nbands
{
double tprice = lower + ((bandpos*bandwidth)*Point);
if (tprice >= Low[barpos]) && (tprice <= High[barpos])
bandsarray[bandpos][0]++;
bandpos++;
}

barpos--;
}

7) filter and display as appropriate
  • #16
  • Aug 31, 2008 11:27am Aug 31, 2008 11:27am
I managed to finish this only to find out there's a similar indicator called "market profile" that's been developed w/ an entire system of trading. Look for it, you'll find it.

The problem w/ arrays is that there's a series of oddities in the way MT4 handles arrays. I'd call them bugs, frankly, but whatever. I had another post on this subject a while ago, found one work-around, but there are conditions where that workaround doesn't work. Long story short, arrays don't always work. And the more complex they are, the less likely they are to work. The biggest problem I had was w/ dynamic arrays, MT4 does not handle them the way it should.
  • #17
  • Aug 31, 2008 8:48pm Aug 31, 2008 8:48pm
Quoting Rabid
I managed to finish this only to find out there's a similar indicator called "market profile" that's been developed w/ an entire system of trading. Look for it, you'll find it.

The problem w/ arrays is that there's a series of oddities in the way MT4 handles arrays. I'd call them bugs, frankly, but whatever. I had another post on this subject a while ago, found one work-around, but there are conditions where that workaround doesn't work. Long story short, arrays don't always work. And the more complex they are, the less likely they are to work. The biggest problem I had was w/ dynamic arrays, MT4 does not handle them the way it should.
Do you think this array issue would be fix when MT5 comes out? I thought I heard that they are working on certain protocol/language fixes with MT5...
  • #18
  • Aug 31, 2008 8:53pm Aug 31, 2008 8:53pm
i can see how this might be effective when looking at weekly candlesticks (with the density overlayed...)

it would show where the resistance/support (whatever you want to call it) was during the previous week...

might even be useful for monthly too....
  • #19
  • Jan 28, 2009 4:22am Jan 28, 2009 4:22am
(Old thread but interesting topic so I thought I might reply)

I have done a similar overlay some time ago, it doesn't look lower timeframes just the same timeframe but see if this is what you are looking for. It looks at highs/lows so it's not exactly what you are looking for but probably quite close.

Code and example image is at another website, here is the url
http://www.forex-tsd.com/177626-post525.html
  • #20
  • Jan 28, 2009 8:45am Jan 28, 2009 8:45am
Nod. Have already developed this concept pretty far w/ the help of some market profile resources. There's another thread out there w/ that.
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