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The T3 Stochastic Momentum index is a trading algorithm based on the interaction of two Forex indicators included in its standard set, while additional smoothing was added to their calculations to increase the accuracy of the signals. The indicator can be used exclusively for trend trading, so it calculations are based on determining the strength and direction of the current trend, as well as the moment of opening a trade. It is presented in the lower window of the price chart as two lines, the main and the signal. Thus, their current values, namely the intersection, location, direction and color are the main factors during the period of determining the market movement.
The T3 Stochastic Momentum index is suitable for use on any timeframe with any currency pairs.
Input parameters
The settings of the T3 Stochastic Momentum index indicator consist of several sections that allow influencing the overall functioning of the indicator. Thus, its Input Parameters section is used to change the values of its technical work, the Colors section is used to change its general visualization, while to add to the window indicator of signal levels, the Levels section is used.
-Length - value of the indicator calculation length. The default value is 13.
-Smooth period 1- period of the main smoothing of the indicator values. The default value is 25.
-Smooth period 2 - value of the period of additional smoothing of indicator calculations. The default value is 2.
-Signal period - period of the signal line. The default value is 5.
-T3 Hot - smoothing period T3. The default value is 0.4.
-T3 original Tim Tillson calculation - Option to use standard T3 line smoothing. Default is false.
-Price - type of the price to which the indicator calculations are applied. By default, it has the Close price value.
Indicator signals
Thanks to the easy-to-perceive visualization, the T3 Stochastic Momentum index is very simple to use. To open a certain trade using the indicator, it is enough to know both the direction and strength of the current trend, which in turn is determined by the intersection of its lines, their direction and location relative to its signal levels, as well as the color of its main line. If the current values of the indicator determine the presence of an upward trend in the current market, long positions are opened, while short positions are opened during a downward trend in the market. If the direction of the current trend changes, trades should be closed.
Signal for Buy trades:
- The indicator lines are moving up from the level of -40, while its main line has a color with a growth value and is located above the signal one.
Upon receipt of such indicator conditions on a signal candle, a buy trade may be opened, due to the presence of an uptrend in the current market. Upon receipt of a reverse signal, namely at the next intersection of the lines, the trade should be closed. At this moment, a change in the current trend is expected, which in turn will allow considering the opening of new trades.
Signal for Sell trades:
- The main line of the indicator has a color with a falling value, while both of its lines are moving down from the level of 40. Its signal line is above the main one.
Upon receipt of such conditions that characterize the presence of a downward trend in the current market, a sell trade may be opened. It should be closed after receiving a return signal from the indicator. At this moment, a change in the current trend is expected, which will allow considering the opening of new trades.
Conclusion
The T3 Stochastic Momentum index is an effective trading algorithm, as its calculations are based on the interaction of several indicators, the accuracy of which has been proven by time. Despite the fact that the indicator is very easy to use, practice on a demo account is recommended before using it on a real deposit.
