The Quantitative Qualitative Estimation ( QQE ) indicator is an offspring from Wilder’s famous Relative Strength Index ( RSI ). The base plot is an RSI smoothed over 5 periods supplemented by a signal line. The signal line is composed of a moving Average True Range (ATR). By smoothing the QQE and signal lines, the QQE becomes less sensitive to short term changes in volatility. Watch the video below or continue reading to learn more:
RSI Crossover vs. Fast / Slow Signal Line Crossover
Originally, QQE signals would then plot as follows:
- Long signal when the RSI crosses the signal line to the upside
- Short signal when the RSI crosses the signal line to the downside
Subsequent versions of theQuantitative Qualitative Estimation indicator feature two signal lines as does our NinjaTrader Indicator Library version. QQE signals are then defined as follows:
- Long signal when the fast signal line crosses the slow to the upside
- Short signal when the fast signal line crosses the slow to the downside
To this end, the color plot between the lines may be interpreted as a trend filter. A green plot indicates an uptrend, whereas red is used for downtrends.
In addition to the plot colors, two trend definitions are available, namely “Cross” and “Thrust”. With the “Cross” setting, the trend simply reflects the two signal lines. The “Thrust” definition however requires trend changes to be confirmed by a thrust bar. Applying “Thrust” will delay entries, but also eliminate false signals. Both “Cross” and “Thrust” trend states can be displayed as paint bars.
QQE Threshold Values
In addition the QQE indicator has threshold lines to determine:
- Overbought / oversold: RSI levels above the 70 level may indicate an overbought scenario whereas values below the 30 level may point to an oversold market
2. Market bias: One may use the 50 midline as a threshold to filter entries, i.e. bullish above / bearish below
In the below chart, we’ve moved on to a 15 min NQ chart displaying the 1st min of trading during the regular open. This gives you a bit more texture than simply using the first tick of the regular section should you wish to use the open as a trend filter. That may then be one condition whereas the second is looking at the RSI vs. the 50 midline. If the RSI then breaks above the 50 benchmark and there’s a fast/slow signal line cross we generate a signal.
Heikin Ashi as Nested Input
Finally, you may apply our QQE indicator library version to an input series other than the price. This is what one refers to as “nested input”. For example, you may set the Heikin Ashi Bars (amaHeikinAshi) as input series. However, please then make sure to apply the HAClose plot as input (not the HAOpen plot). In the below example we’ve used the basic DanValcu formula which produces a smoother output. As one may see, it is also slightly more sensitive with regards to the oversold / overbought thresholds. For more information on the Library Heikin Ashi, please refer to our Spotlight review available here.
Conclusion
To sum up, theQuantitative Qualitative Estimation is based on the RSI indicator but with a smoother less erratic plot. One may use the signal lines to determine short term trends and choose between the cross vs. thrust definitions to do so. Finally, you may combine the color plot with the 30, 50 and 70 threshold lines to determine overbought / oversold and trend bias.
Other Library Indicators
Apart from the Quantitative Qualitative Estimation indicator, our our NinjaTrader indicators library features the following Advanced Oscillators entries: Connors RSI, Laguerre RSI, MACD BB Lines, MACD KC Lines, Multiple MACD, Multiple TSI, Projection Oscillator, Rainbow Oscillator, Roofing Filter, SVE Stochastics IFT and the Z-score.
Furthermore, the standard Momentum Oscillators category features the Awesome Oscillator, Acceleration Deceleration, Balanced Momentum, Double Smoothed Momentum / Double Smoothed Stochastics from Blau as well as Bressert’s version of the Double Smoothed Stochastics. We also offer a new and improved version of the standard Relative Strength Index, Slow RSI, Stochastic RSI and the Traders Dynamic Index (TDI). You may find additional details and suggestions on how to apply the Awesome Oscillator and the TDI indicator in our Indicator Spotlight.
