Using a smoothed RSI line in technical analysis, QQE is a technical indicator that pinpoints overbought and oversold areas. An acronym for quantitative qualitative estimation is QQE.
From the relative power index, both quantitative and qualitative estimation indicator is derived. In actuality, it is the more sophisticated RSI indicator.
When forecasting a currency pair, traders utilize this indicator to help them with important decisions. In contrast to the RSI indicator, this indication is less well-known. As a result, if you trade with the RSI indicator, I also advise using the QQE indicator, which is a more sophisticated version of the RSI indicator and can help you make better trading decisions.
How Is the QQE Indicator Used?
The RSI and QQE are frequently used in tandem. The QQE is frequently used for the following purposes:
1. Identify Trend Detection
Market bullishness is indicated by numbers above 50, while market bearishness is indicated by values below 50.
The QQE can act as a trend filter in this way. For instance, only numbers above 50 can be used for long transactions, whereas values below 50 are needed for short trading.
2. Recognize Oversold/Overbought Conditions
Overbought conditions are indicated by QQE values above 70, while oversold conditions are indicated by values below 30.
When the QQE crosses above the 30 lines, long trades can be executed, while short trades can be executed when the QQE crosses below the 70 lines.
3. Recognize price and momentum divergence
Price frequently follows momentum. A divergence in the price from the QQE could indicate impending reversals.
Prices are making higher highs while the QQE is making lower highs, forming a bearish divergence. This could indicate the beginning of a bearish reversal.
While the QQE is making higher lows, prices are posting lower lows, forming a positive divergence. There might be a coming positive reversal.
4. Determine Momentum in the Short Term
Through additional smoothing of the RSI line, the sluggish tail line of the QQE is created.
Short-term momentum is to the upside when the smoothed RSI line crosses above the slow trailing line, and long trades can be executed. In contrast, shorts may be a better option when the smoothed RSI crosses below the slow trailing line, signaling bearish short-term momentum.
We will produce entry signals for the remainder of this post by using the QQE in this cross above/below configuration. The fact that this strategy will produce a lot of false entries in a ranging market is an evident disadvantage.
Let’s avoid relying solely on the QQE indicator to tackle this Instead, we will use a moving average trend-tracking approach in conjunction with it.
QQE Indicator-Based Scalping or Day Trading Strategy
Speed is a talent that both day traders and scalpers need to learn. They must be capable of making a decision in only a few minutes or perhaps a few seconds. Because of this, they frequently look for methods to reduce the complexity of their trading decisions to predetermined “ifs” and “then” procedures. The choices are already chosen before the deal ever occurs thanks to a predetermined framework for decision-making. This enables traders to act automatically as opportunities in the market arise.
One benefit of employing an indicator-based strategy is that presetting the rules could be accomplished more quickly than with a non-indicator-based approach. For instance, price action is very subjective and requires a trained eye to evaluate the charts.
How can the QQE indicator be used in trading?
Utilizing the four approaches listed above makes trading with the QQE indicator very simple. Just follow the set regulations when you buy and sell. My experience has taught me that this is not a strategy for becoming a successful trader. The four approaches mentioned above can be used for technical analysis, but I do not advise using them for trading. The preceding simple techniques can also be backtested.
Here, I’ll show you how to use the QQE indicator in conjunction with the price action approach. We’ll combine a candlestick pattern with QQE overbought/oversold values in this approach.
Open the buy trade
- Check the QQE indicator’s value first; it must be less than 30.
- Look for bullish candlestick patterns like a pin bar or bullish engulfing in the oversold area.
- After a bullish candlestick pattern has formed, place a buy order and lower your stop loss below the swing low or a few pip levels below the candlestick pattern.
- When the QQE indicator passes the 70 levels, exit the trade.
Open the sell trade
- Make sure the qqe indicator is over 70 levels by checking its value (overbought conditions).
- Find our bearish candlestick patterns when the market is overbought.
- Bearish candlestick patterns should be followed by the opening of a sell order with a stop loss placed above the swing high or the candlestick pattern’s high.
- The transaction should be closed once the QQE Indicator value falls below the 30 levels.
The QQE Indicator’s Benefit
The QQE indicator depicts two lines one rapid and one slow based on a challenging mathematical equation that oscillates. Crossovers between the fast and slow lines are possible when there are two oscillating lines, and these crossovers can be utilized to confirm a modest trend bias.
The 50% line on the QQE indicator is another benefit. Another filter for the trading rules might be implemented to account for this. The price is in an uptrend when the QQE lines are above the 50% line, and in a downtrend when the lines are below the 50% line.
A QQE indicator can be seen in action in the chart below.
The enigmatic QQE signal, therefore, merits your attention. The QQE is more adaptable than single-line momentum indicators like the RSI and CCI since it comprises of two lines: the smoothed RSI and the slow trailing line.
As was shown above, using the QQE in a cross above/under fashion can aid in identifying high-momentum entries. I suggest combining the QQE with trend-detection indicators, whatever you decide to apply it.
This kind of strategy is one that holds off on making an entrance until the reversals are confirmed. Keep in mind that the entries on the sample trades above are just thrusts continued. These entries are already validated by the QQE indicator rather than genuine reversals. Due to the strategy’s delayed response while it awaited the QQE indicator’s confirmation, the possibility for earnings has been slightly reduced. However, the likelihood of a phoney reversal is reduced when you enter a verified thrust.