The QQE is not a well-known indicator, and that brings up an important point, how does it compare with more popular momentum indicators, and is it a good choice for your trading strategy.
The Quantitative Qualitative Estimation indicator is a momentum-based indicator that is used to decide trends and sideways.
Similar to the RSI indicator, actually, the Qualitative Quantitative Estimation is a smoother variant, that enlarges the concept of the RSI with two additional volatility trailing stop lines.
The lines get formed from the true range of the quick and a slow-moving average. The ATR lines are smoothed, which contributes to this indicator being not susceptible to short-term volatility.
The typical technique of implementing QQE is to observe for interaction both types of trailing stop lines in periods. When the QQE line show oversold or overbought circumstances.
Assets with a more volatile character, such as stocks, forex, and futures can get analyzed with the Qualitative Quantitative Estimation.
Also Read: How Market Conditions Affect Your Trading
Contents
- QQE Indicator Calculation
- Quantitative Qualitative Estimation
- Interpretation of QQE Signals
- How Is the QQE Indicator Used?
- Conclusion
- FAQs
QQE Indicator Calculation
Indicators are created by mathematics formulas that are some instances are relatively simple, but often are complex and most traders are grateful for trading software that does all the calculation for them.
It can be useful to get a better understanding of the methodology by examining the formula, that whey investors can have a better grasp of the mechanics that influence the indicator.
The calculation for the indicator gets based on the following steps.
- Estimate the 14-period RSI.
- Acquire the flatten RSI by using the 5-period EMA of the RSI.
- Acquire the absolute value of the bar alteration is the flatter RSI.
- Use a twenty-seven period Exponential Moving average two times, to the values of the previous step.
- Acquire the slow trailing line by multiplying the outcome of the previous step by 4.236.
Quantitative Qualitative Estimation
One of the crucial elements of the Qualitative Quantitative Estimation is the smoothing factor, which is the moving average period that is used in smoothing the RSI indicator.
When using the QQE indicator signals for trading are displayed when a blue line intersects the fifty level and breaks the line.
It's preferable to observe the trend signals by placing a purchase signal if the blue line intersects the blue line in an upwards trajectory when the two lines are under the fifty level.
Traders can also place a sell entry when the cross is in a downward direction is the two lines are under the fifty level.
An alternative option for the QQE to produce signals is by divergences amid the price and the QQE in an attempt to observe the possible combinations for trend continuation or reversal of the trend.
The circumstances for a bullish divergence are when the price can create lower lows, and the QQE setting higher lows. Price can reach higher highs, parallel to the QQE indicator creates lower highs as an option for bearish divergence.
Also Read: The RSI Forex Indicator Complete Guide
Interpretation of QQE Signals
Overbought or oversold: Overbought happens if the QQE indicator is over 70 levels. Oversold when the QQE is under the 30 level.
If any of the QQE elements is going under the 30 level and moves over being an indicator of a long combination. Also, when a QQE indicator element moves under the 70 level, it may indicate a short option.
Smoothed RSI Crosses the ATR
RSI cross of the fast or slow ATR trailing lines . If the RSI moves over the fast or slow ATR trailing lines it indicates a buy option. Contrarily if the RSI goes under the fast or slow ATR trailing lines it indicates a short setup.
Divergences amid the QQE indicator and price action
Hidden and regular are the 2 forms of possible divergence combinations in this situation. Reversal in the trend is what signal with the regular model, while the hidden divergences can may signal resumption of the trend.
A regular bullish divergence occurs if price action gets creating current lows while lows that are moving up are the result of the technical tool.
A regular bearish divergence is a situation, when the market forms higher highs, while the indicator forms lower highs. A hidden variant of the bullish type occurs if price action is creating lower and the technical toll shows higher highs.
While in the case of bullish divergence of the hidden format, the opposite happens if the price action starts forming higher lows, while the technical instrument we are using has lower lows.
RSI cross of the 50 levels
If the RSI goes under the 50 level, it indicates options for purchase. On the opposite side, if the RSI goes under the 50 level, it reveals a short setup.
ATR trailing line crossover
If the fast ATR trailing line moves over the slow trailing line, it indicates a long setup. Opposite if the fast ATR trailing line goes under the slow trailing line, then a option for going short is indicated.
How Is the QQE Indicator Used?
Best results with the indicator can be achieved when it's aligned on a higher timeframe trend. The chances for profitable trades can be improved with buying at support and selling resistance.
As we already said the QQE shares characteristics with the RSI, and the indicators are frequently employed in the following instances.
Locate Overbought or Oversold Conditions
QQE values over seventy signal overbought conditions and values under 30 signal oversold conditions.
Long trades can happen if the QQE moves over the 30 lines, and shorts can get opened if the QQE goes under the 70 line.
Detect Short-Term Momentum
The QQE’s slow trailing line is acquired by further flattening the smoothed RSI line. If the smoothed RSI line moves over the slow trailing line, it signals short-term momentum is to the upside, and long trades may get initiated.
If the flatter RSI goes under the slow trailing line, short-term momentum is to the downside, and shorts can get implemented.
Trend Detection
Values over fifty signal a bullish market, and values under fifty signal a bearish market. In this setup, the QQE is utilized as a trend filter.
Long trades can get performed if values are over 50, and for short trades, the need is for values to be under 50.
Spot Price & Momentum Divergence
Momentum frequently drives price. The divergence between price and the QQE can signal reversals that are forthcoming. During bearish divergence, prices achieve higher highs, and the QQE creates lower highs. Indicating an impending bearish reversal.
While in a bullish divergence, prices are achieving lower lows, and the QQE is archiving higher lows. In this situation, a bullish reversal can be emerging.
Conclusion
The QQE indicator is mysterious, from time to time it's recommended on trading forums, but generally it's not a frequently referred as an indicator that offers profit-making potential.
The complex formula can be one reason for its anonymity, while others think that the RSI which is the basis for the QQE is good enough for the job.
Both the standard RSI and the QQEs’ smoothed RSI line follow price action with little lag. But the difference between the RSI and the QQE is that the second has two extra lines.
It is offered on most trading platforms, so the complex formula is not an obstacle to using it the automation process will do all the calculations and visual representation o the data.
Reading a visual representation on charts is not a problem, although it's recommended to get some training on the indicator to properly interpret the information received, otherwise potential losses are possible.
While it's not a popular indicator that doesn't mean it should be underestimated. Versatility is its strong side because it's formed with two lines the smoothed RSI and the slow trailing line.
Implementing the QQE will provide data that is useful in preparing a trading strategy, and its biggest benefit is that it can get used in any type of market including Forex markets.
Confirming the alerts received from the QQE with other technical indicators is the best option to ensure you are making the right trading investments.
If you want to make money observe how the lines are plotted on the chart and predict the outcome of the trend movement.
FAQs
What Is QQE?
The QQE indicator is a momentum indicator used to detect the trend and sideways. The Qualitative Quantitative Estimation is similar to the RSI indicator but with additional two volatility-based trailing stop lines.
How Is QQE Calculated?
The formula for the QQE indicator is complex but not impossible to understand if the basics are already familiar. The calculation gets based on the fast-trailing level, and slow trailing lines get located by estimating the ATR of the smoothed RSI over n-periods. This smoothed ATR of RSI is then multiplied by the fast and slow ATR to calculate the final trailing levels.
