REDline Manual
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Components Explained - REDline
Components Explained - Choppiness Line
REDline is a custom built indicator used by DROID to both indentify high-probability trade entires and to use as a general market trade filter. The indicator monitors market volatility, and compares this to recent market price movements, in order to evaluate the strength of a prevailing trend.
REDline is a trend identifier. It is NOT a reversal indicator. Zero line crosses are NOT indications of a 'bottom'. REDLine is best used as an additional trade CONFIRMATION within your existing trade systems. No indicator should be solely relied upon for trade entries and exerts.
Indicative use - Crossovers (from <0 or under grey Chop-zone to above 0) consider long trade trigger - Crossunders (from >0 or above grey Chop-zone to below 0) consider short trade trigger - Consider exiting positions, or tightening SL, when REDline moves into chop-zones - If using Choppy Market Filter ignore trades in red zones. Yellow can be traken with additional confluence. Green are highest probability entries To increase the probability of trade signals users should consider prevailing market strucutre. - If a bullish trend is established and REDline is persisting below 0 - assume this is signaling bullish weakness - If a bearish trend is established and REDline is persisting above 0 - assume this is signaling bearish weakness - Trade probability can be increased by looking for lower timeframe entries ( ie at the 4Hr level) that agree with its direction at the higher timeframe There are some additional trade signals that can be turned on.
1 Candle Continuation x-crosses : Signals 1 candle after a primary REDline signal and Choppy Market Filter turns to Green 2 Candle Continuation, +-crosses : Signals 2 candles after a primary REDline signal and Choppy Market Filter turns to Green (Risky) 3 Candle Loosey Goosey ▢-squares - Signals when the REDline has increased for at least 3 candles and Choppy Market Filter turns to Green (Riskiest) Use this indicator at your own risk.
Here are some examples of how REDline can be used within a trading system.
Indentifying the formation of a trend
Price is moving through a tight choppy trading range. The Choppiness Line background is red. There is no observable trend so you are not making trades...That is until price moves toward the top/bottom of a trading range. You predict price may breakout/breakdown. You consult REDline. Is a REDline zero line cross imminent? Is the Choppiness Line Market Filter green? A zero line cross, with a Green background that agrees with the move you are watching indicates you should take the trade
You are already in a successful trade
You are in a profitable trade. Price has been forming HH's or LL's. You are considering whether to take profits or exit the trade. You consult REDline. A zero line cross from REDline indicates the weakening of the trend. If you are in a long and see REDline cross below zero you might choose to tighten your stop-loss or close the trade. It does not mean 'go short'. If the market structure is still bullish you can assume this signal is an indication price might move to consolidate. It does not mean a reversal is imminent. If the Choppiness Line Market Filter is Red, the market may have stopped trending and entered consolidation. You might exit your trade and then wait for bullish momentum to return. When REDLie crosses back above the line, you re-enter (if you think the trend will continue).
Use REDline as a high-level filter
On Higher timeframes, or for more conservative traders REDLine can be an effective market filter. If the line is above the zero / no trade zone you only look for longs. If you it is below zero / no trade zone you only look for shorts. On high timeframes (like Daily) REDline might only give a signal every few weeks, or longer
What The REDline is not
Disclaimer An important note. REDline is not a crystal ball. No indicator can provide trade signals without error. According to extensive backtesting this indicator can provide consistent, high-probability entires however REDline does not constitute a full trading system on its own. All trading systems should include multiple layers of trade confluence and have an active risk management profile in operation at all times. (edited)
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