The Quantitative Qualitative Estimation a.k.a. QQE indicator applies a smoothed Relative Strength Index (RSI) indicator and two volatility-based trailing levels (fast and slow). A post discussing different applications of the indicator, and QQE signals specifically, is available from our Indicator Spotlight (with video).
Indicator Description
The QQE indicator is calculated as follows: The Fast Trailing Level (TL) and Slow TL are found by calculating the ATR of the smoothed RSI over n-periods. The ATR is then further smoothed using the 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. One may identify QQE signals as follows:
QQE indicator and QQE signals interpretation:
- RSI cross of the fast / 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.
- 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.
- 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.
- 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 when price action is setting new lows and the QQE indicator has higher lows. Regular bearish divergence is when price action is setting new highs and the QQE indicator has lower highs.
- Hidden bullish divergence when price action is setting higher lows and the QQE indicator has lower lows. Hidden bullish divergence when price action is setting lower and the QQE indicator has higher highs.
- Overbought / oversold: Overbought when the QQE indicator is above the 70 level. Oversold 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 cross below the 70 level, it may signal a short setup.
Other Library indicators
You may best use the QQE indicator 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 how to utilize the Ichimoku Cloud indicator (with video).
You may furthermore 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. Also, consider trade management with an 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.
Finally, other than the QQE indicator, our advanced oscillators category features the Projection Oscillator and the SVE Stochastics ITF. These tools build on the same concept as the standard momentum oscillators, but with a higher degree of sophistication. In general, they allow for added value approaches, utilizing a set of more complex algorithms than the standard momentum oscillators. This category features the Acceleration Deceleration, Double Smoothed Momentum, Slow RSI, Traders Dynamic Index, and improved versions of the standard RSI and Stochastics.
The QQE indicator is available for NinjaTrader 8.