Failure Index - MetaTrader 5 Script | Forex Indicator Download - MT4/MT5 Resources - MetaTrader 5 Resources

The source of this information is the February 2004 issue of Active Trader magazine.

This system was inspired by the more successful stock systems that appeared in Trading Systems Lab. These strategies share a common timing technique - they attempt to take advantage of smaller extreme price movements.

This system detects when a price deviates significantly from its normal levels by measuring how far it moves above and below a "detrended" simple moving average (SMA). The resulting indicator is called the "Failure Index" and represents the percentage of price moves above or below the detrended SMA. In theory, prices will return to normal levels and we can profit from the temporary deviation.

The calculation formula of burr index is:

The system buys when the fault index is below -2 and sells when it rises back above +2. However, if the highest failure index value in a 30-bar period is greater than 5, the system will not enter a long trade. This prevents the system from entering long trades when price recovers from extremely overbought levels, such as a dip at the top of a strong bull rally.

The color of the Glitch Index (GI) bar helps illustrate what the system is doing.

The system does not sell short.

PS: This system is designed for daily and weekly time frames. For shorter time frames, levels must be adjusted.

Attachment download

📎 glitch_index.mq5 (8.53 KB)

Source: MQL5 #20439