Correlation candles – indicator for MetaTrader 5
Indicator that combines rank (auto)correlation of 4 prices in to one single indicator .
Instead of using just one price, this indicator uses the standard 4 prices: open, close, high and low, calculates its (auto) correlation ranks and combines those result into one indicator. The candle colors (“trends”) are determined based on the correlation of open to close. The rest (the highest and the lowest) are good indicators of current volatility — the presence or the lack of it.
The correlation types supported by the indicator are Spearman and Pearson correlation. Although they are similar, the difference can be significant and some experimenting is advised to find the type that is suitable to specific trading style. Default calculation length it set to a rather “trend orientated” usage. To use it for momentum like (fast) response, set the period to shorter value(s).
Unlike the classical rank correlation — in this indicator “rank” does not mean the same as when the correlation is applied to independent sets of data (prices, values, …). In this case it becomes more a “trend direction” or “momentum like” and it should be used like that.