Uncertainty Indicator

This indicator try to show the amount on uncertainty that exist by plotting a 3-days
moving average of the difference between the 'close' and 'ohlc4',
which is compared to a 20-days Bollinger Band with a standard deviation of one .

This menas that when the 3-day curve is above the upper limit, the Uncetainty is
higher than it has been during 84% of the last 20 day period (and vice versa for
the lower limit).

By using Open,High,Low,Close you get four opinions of what the price should be for
the current period. If there is a difference between 'close' and 'ohlc4' there seem
to exist an uncertainty if the closing price is correct.

Can we say anything about direction? I don't think so; either the 'close king' has
to listen to its 'people' and move toward 'ohlc4', or the other way around.

A way to see if the uncertainty increases over time could be to see if:
abs(close - ohlc4) < abs(close - ohlc4) ,which say that we are more uncertain
this period than the in previous one .

And I guess, with increased uncertainty comes 'fear' of loosing money.
Open-source script

In true TradingView spirit, the author of this script has published it open-source, so traders can understand and verify it. Cheers to the author! You may use it for free, but reuse of this code in a publication is governed by House Rules. You can favorite it to use it on a chart.

Want to use this script on a chart?


I did some simple manual backtesting, taking position every time it gave signal, result: 15 trades , +19.57% profit , on average: +1.3% profit with a position length average of 4 days :-)
kruskakli kruskakli
@kruskakli, and I see a type in the description. It should say: abs(close - ohlc4) < abs(close - ohlc4)
kruskakli kruskakli
@kruskakli, whaat? the left/right brackets disapears !?
martinweb kruskakli
@kruskakli, could you explain how you make use of it? do you only look at it at the daily chart? because you are talking of 3 days and 20 days.
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