Trend Spark falls into a category of indicators called “stop and reverse.” Trend Spark, and indicators like it, generally indicate a direction of the market and display a level which can be used to stop out trades. Once stopped, a trader can place a trade in the opposite direction or reverse.
Trend Spark entries and trade management can be used with just about any tool to build a sense of where a market is likely to go.
The elements of basic usage for a buy setup are:
1. Wait for 2 Buy Dots to appear after a series of Sell Dots;
2. Place a limit buy order at the Retrace Dots;
3. Place the initial stop below the Buy Dot using the stop rules below.
4. If the market continues up, trail stops up behind new Buy Dots using the stop rules below until the trade is stopped out.
The rules are reversed for sell setups.
Following the basic usage described in the guide that comes with the study allows a short-term trader to put into practice elements of a trend trading strategy:
• Identifying and trading in the direction of the trend by using the Buy Dots and Sell Dots; and
• Waiting for a counter-trend move to enter a trade.
Additional usage suggestions are outlined on the indicator's download page.
There is only one setting to adjust the behavior of Trend Spark. Sensitivity has a default value of 0.8. For traders who wish to experiment it can be adjusted to a higher number which will generally react slower to changes and have looser stops or lower which will generally react faster to changes and have tighter stops.