Quantitative Qualitative Estimation (QQE)

The Quantitative Qualitative Estimation (QQE)

The QQE indicator applies a smoothed Relative Strength Index (RSI) indicator and two volatility-based trailing levels (fast and slow).

Indicator Description

The Quantitative Qualitative Estimation (QQE): The Fast Trailing Level (TL) and Slow TL are constructed by calculating the ATR of the smoothed RSI over n-periods and then further smoothing the ATR using an additional n-periods Wilders smoothing function. This smoothed ATR of RSI is then multiplied by the Fast and Slow ATR Multipliers to calculate the final Fast and Slow Trailing Levels.

Using the QQE indicator:

The QQE indicator can be used to identify a variety of setups:

  1. A RSI crossover of the fast or slow ATR trailing lines. When the RSI crosses above the fast or slow ATR trailing lines it signals a buy setup. Conversely, when the RSI crosses below the fast or slow ATR trailing lines it signals a short setup.
  2. RSI cross of the 50 level. When the RSI cross above the 50 level, it signals a buy setup. Conversely, when the RSI cross below the 50 level, it signals a short setup.
  3. Fast / slow ATR trailing line crossover. When the fast ATR trailing line cross above the slow ATR trailing line, it signals a long setup. Conversely, when the fast ATR trailing line cross below the slow ATR trailing line, it signals a short setup.
  4. Divergences between the price action and the QQE indicator. There are two types of divergence setups: Regular and hidden. Hidden divergences may signal trend continuation whereas regular divergences can indicate trend reversals.
    • Regular bullish divergence is seen when price action is setting new lows and the QQE indicator has higher lows. Regular bearish divergence is seen when price action is setting new highs and the QQE indicator has lower highs.
    • Hidden bullish divergence is seen when price action is setting higher lows and the QQE indicator has lower lows. Hidden bullish divergence is seen when price action is setting lower and the QQE indicator has higher highs.
  5. Overbought / oversold. An overbought scenario is seen when the QQE indicator is above the 70 level. Oversold scenario is seen, when the QQE is below the 30 level. If any of the QQE components have been moving below the  30 level and cross above, a signals a long setup. Conversely, if any of the QQE indicator components have been moving above the 70 level and then cross below, it signals a short setup.

Other Library indicators

The QQE indicator is best used when aligned with a higher timeframe trend / momentum bias. For a few suggestions on how to do that, please review our Indicator Spotlights on the TDI indicator, Heikin Ashi bars and the Ichimoku Kinko Hyo. You may also increase the probability of successful trades by “buying support and selling resistance”. Additional information on that can be found in our Indicator Spotlights on the Daily Pivot Levels and Fibonacci Retracement Lines. Finally, you may manage positions by using a ATR trailing Stop as discussed in our Indicator Spotlight newsletter. The ATR stop indicator is available from our Trailing Stops category, along with the Chande Kroll Stop, Chandelier Stop, HiLo Activator, SuperTrend and the Wilder Volatility Stop.

The indicator is available for NinjaTrader 8.