Have you ever found yourself skipping your indicator signals? Maybe you have too many moving averages on your chart, or some different momentum indicators that basically follow the same thing? If your indicators are preventing you from clearly seeing price action, this could be a problem, but fortunately, we have a solution!
We have recently added a new and very nice indicator to the platform: @GoNoGo Trend. This tool uses the “secret mixture” of commonly used indicators and draws candles based on the cumulative reading of all the indicators inside it.
The purpose here is twofold: first, it significantly cleans up your chart, providing an unobstructed view of price action. Additionally, it paints candles in five easy-to-understand colors that represent the different levels of trend conditions that can occur. In this blog, we will detail how to use GoNoGo Trend® in your trading, whether you are long or short. First, however, detail the indicator.
Understanding GoNoGo Trend® Signals
The first thing you’ll notice when you add a GoNoGo Trend® to your chart are the unique candle colors; Purple, Pink, Orange, Aqua, and Blue. What does each color mean?
purple: strong blocking (the indicators inside are flashing a strong signal “don’t go too long”)
Pink: Weak No-Go (the indicators inside are blinking a weak “don’t go long” signal)
orange: neutral (mixed signal from the indicators inside, it is better to wait for further confirmation)
Aqua: weak transition (the indicators inside are blinking a weak signal “don’t go short”)
blue: strong thrust (the indicators inside are flashing a strong “don’t cut” signal)
As in the image above, the candles are painted purple on the left side of the chart. Purple indicates that the price is in the direction of a “strong block”. At this time, all the “secret sauce” indicators on GoNoGo Trend® are flashing bearish and it is not recommended to consider a long position. After that we see the color change to pink. A potential bottom was found and the price started to reverse. Just as you are looking for round bottoms in momentum indicators, divergences or perhaps moving average crosses to determine that the price may be about to turn, you can use the pink colored candles to tell you the same. They suggest that some of the indicators in the GoNoGo Trend® are starting to show signs of bottoming out. Remember, however, that it is still in a “weak not going” state and therefore it is best to wait for more bullish colors to appear before trying to buy.
After that, the color changes to orange. Orange represents a “neutral” reading. This neutral reading indicates frequency. The price reached the turning point level but did not cross the threshold into the bullish zone. We’re getting close to a long signal here, but it’s still best to wait as the signal can turn back into “No Go” quite easily from here. After that, the color changes to a watery color, which represents a “weak” reading. This is the start of a long signal, but remember that this signal is weak, so it may be best to only start from the starting point at this point.
Finally, the color of the candle turns blue which is a reading of “strong movement”. This reading indicates that all indicators in the area are now in bullish territory. This is the safest time to take a long biased trade.
Now that we understand what each color means, let’s dive into how to actually do the deals based on GoNoGo Trend®.
GoNoGo Trend® trading
Although colors make it very easy to understand the trend at any given time, markets are rarely as simple as “buy when this happens” and “sell when this happens.” Take, for example, the example below. The histogram finds a bottom and starts to reverse. We see two colored “neutral” candles, then two “weak” candles before the “go strong” signal appears. In this theoretical situation, we are buying because we see a “go strong” signal and plan our exit in one of two places: we can place a stop at or near the entry point or exit when we see the GoNoGo Trend® change from a “go” to a “forbidden” signal. Unfortunately, if we had taken this trade it would have been a loser regardless of our exit, but why did this happen?
Note first the duration of the “No Go” trend on the left side of the graph, then the speed at which that trend has changed. Lows rarely reverse without some backtesting, so it would be wise to allow the trend to develop further before taking the trade. But the most important thing is to note the time frame we have chosen. In this case, we are using the five-minute time frame. The more you get into smaller timeframes, the more quickly trends will change. So how can we analyze GoNoGo Trend® more comprehensively to place successful trades?
Use multiple time frames
One of the key factors when conducting any technical analysis is knowing the trend across multiple time frames. The setup may look tempting on a smaller timeframe, but when you zoom out, you may find that the trend of the larger timeframe is opposing, or not progressing quite as much as the trend of the smaller timeframe you selected. Inversely, setting on a small time frame may be supported by what is happening on the larger time frames. Remember that markets tend to be fractal. If setups fail on the larger timeframes, they usually fail on the smaller timeframes first, and vice versa. In trading, it is always better to work with a top to bottom approach in terms of time frame because the long term trend will often determine how short term trends work. Using this idea, let’s take a look at the same chart on a larger time frame.
When we look at the hourly time frame in the above chart, we see some very clear price action signals that indicate a trend change. Specifically, the hourly candle containing the 5-meter buy signal was the first “weak weakness” signal seen on that time frame since the bottom was established. Had we been observing the hourly time frame, this candle would surely have piqued our interest and supported the theory of long buying on the smaller time frame, but it is likely that we will have to wait for the “going strong” signal to appear before entering the trade. This would have allowed us to conserve our emotional and financial capital. We had gotten into the trade much closer to the bigger move that occurred shortly thereafter, which put us in the trade at just the right time rather than jumping the gun in the lower time frame.
Also remember how we mentioned that markets tend to be fractal? This is an excellent example of that idea. The lower time frames were the first to test the “strong breakout” signal, then the longer time frames followed suit.
keep up with the trend
Now that we understand how to use GoNoGo Trend® on multiple timeframes to persuade us to enter and exit a trade, let’s talk about how to use it to keep us in the trade.
Consider the chart below: On the left side is the weekly $QQQ chart from the Covid bottom. Notice the GoNoGo Trend® change from a “Neutral” reading to a “Weak Go” reading a few weeks after the dips occurred. This chart remained “Weak Go” or “Strong Go” for the entire upward movement. Not even once did he give us a sign of “neutrality”. However, if you focus on the daily chart, there have been many pullbacks that may have forced you to exit the trade. Again, the focus here is on maintaining emotional and financial capital. Keeping the focus on the weekly time frame would have kept you in the trade longer and, in the end, would have been more profitable. When we saw the GoNoGo Trend® change from “weak” to “neutral” and then to “weak doesn’t go” in January and February of 2022, this was a clear indication of a trend change and a good reason for us to exit the long position we got in 2020. Also note This indicator has only seen pain since that signal changed!
Using GoNoGo trend with other indicators
If you don’t feel comfortable simply relying on GoNoGo Trend® to provide you with entry and exit signals, you can add other indicators to your chart for further confirmation. Take, for example, the graph below. Specifically, note the difference between the price and the RSI. Oftentimes, these types of differences can indicate that power is building up even when the price indicates otherwise. Difference helps us stay alert. We don’t know exactly when the trend will change, but we suspect it might, and our skepticism rests on the gap. Note that the color of the candle quickly changes from orange to aqua blue. We take our entry when we see the ‘Go Strong’ signal and start thinking about the exit when we see the candle turn ‘Neutral’. Supposedly, as soon as we see the “not going strong” signal, we exit the trade, making a profit of 5.7%.
It is possible to trade divergences in both directions, long and short. The chart below has an equal and opposite setting like the previous example. On the left side of the chart, we see the price in a very strong “Go” direction. As it continues to make higher highs, however, we see that the RSI is making lower highs, indicating that the strength is waning as the price increases. This is a warning sign and gives us an expectation that the price action may turn around at some point. We get one big “neutral” candle and then we see the trend change to the “No Entry” area. Had we taken a sell trade at this point and held it until the GoNoGo® Trend turned back into a “Go” signal, we would have made at least 29.27% of the trade. Had we held through the first signal change, we would have made an additional 20% profit by the next time I switched to reading Go.
If you would like to learn more about the GoNoGo Trend®, please take the time to watch this video featuring the creators of the indicator, Alex Cole and Tyler Wood.
So there you are, people. Some basic ways to think about how to use GoNoGo Trend® in your technical analysis. We hope you found this helpful and we’d love to hear how you use this indicator! Feel free to reach us in chat with any questions or ideas you may have.