What is The QQE Indicator (Quantitative Qualitative Estimation)?

The QQE Indicator is a mysterious indicator. It sometimes appears in trading forums. The fact that makes it even more mysterious is that it is not a well-known indicator. Therefore, many wonder if it deserves a place alongside traditional momentum indicators like the RSI and CCI. Thus, it becomes essential to investigate this mysterious element in detail.

Highlights:

• The QQE, a mysterious indicator occasionally mentioned on trading forums, isn’t widely known for its profit potential.
• Despite its complexity, it offers versatile uses like trend detection, overbought/oversold conditions, divergence detection, and short-term momentum analysis.
• The QQE’s versatility in various markets, including Forex, makes it a valuable tool for traders willing to explore its potential.

What is QQE Indicator?

The Quantitative Qualitative Estimation (QQE) indicator is an advanced tool based on Wilder’s well-known Relative Strength Index (RSI). Essentially, the QQE takes the RSI and applies additional smoothing techniques to it. This results in a more refined and stable version of the original RSI. This heavy smoothing process helps to filter out market noise and provides clearer signals for traders. By doing so, the QQE offers a more reliable assessment of market momentum and trend strength compared to the standard RSI. 

In addition to its core smoothing function, the QQE often incorporates elements such as signal lines and qualitative assessments. These additions further enhance its ability to identify potential buy and sell opportunities, making it a valuable tool for traders seeking to improve their market analysis and decision-making processes.

What are it’s Components?

The QQE has a complex task to perform. Therefore, it is apparent that it will have a number of functional components to perform various tasks. Its essential components are:

1. Quantitative Analysis

This aspect involves the numerical and statistical analysis of historical price data. The QQE uses the Relative Strength Index (RSI) as a base for its calculations. It then applies a smoothing technique, often a moving average, to the RSI to reduce market noise and provide clearer signals.

2. Qualitative Analysis

This component involves interpreting the smoothed data to make trading decisions. The QQE attempts to identify the quality and strength of a trend, helping traders understand whether the trend is strong, weak, or likely to reverse.

3. Signal Lines

The QQE calculator often includes signal lines, which are derived from the smoothed RSI. These lines help identify buy and sell signals. When the QQE line crosses above the signal line, it may indicate a buying opportunity. Conversely, when it crosses below the signal line, it may suggest a sell opportunity.

The Input Parameters

• F (default = 5): This is the smoothing factor.
• AlertOnCrossover (default = false): If true, alerts will be issued when two QQE lines cross.
• AlertOnLevel (default = false): If true, alerts will be issued when the QQE RSI line crosses a given level.
• AlertLevel (default = 50): This is the indicator level for signals. It is not recommended to change it.
• ArrowsOnCrossover (default = true): If true, the indicator will draw arrows on the chart when QQE lines cross.
• CrossoverUpArrow (default = Green): This is the arrow color for a bullish crossover.
• CrossoverDnArrow (default = Red): This is the arrow color for a bearish crossover.
• ArrowsOnLevel (default = true): If true, the indicator will draw arrows on the chart when the QQE RSI line crosses a given level.
• LevelUpArrow (default = Green): This is the arrow color for a bullish crossing of a line.
• LevelDnArrow (default = Red): This is the arrow color for a bearish crossing of a line.
• NativeAlerts (default = false): If true, text signals will appear.
• EmailAlerts (default = false): If true, signals will be sent via email.
• NotificationAlerts (default = false): If true, push notification alerts will be sent according to MetaTrader notification settings.
• UpperTimeframe (default = PERIOD_CURRENT): If set to a higher time frame than the current one, the indicator will calculate data from that time frame.
• ObjectPrefix (default = “QQE-“): This is the prefix for chart objects to ensure compatibility with other indicators.

Calculating QQE Indicator

To calculate using the default indicator values, first, it is important to calculate the 14-period RSI. Then, it is required to smoothen the RSI by taking the 5-period EMA of the RSI. Next, the users must get the absolute value of the bar-to-bar change in the smoothed RSI. After that, one need to apply a 27-period EMA to these values twice. Finally, one needs to obtain the slow trailing line by multiplying the result by 4.236.

Uses of QQE Indicator

The QQE Indicator has the following uses:

• The QQE’s slow trailing line is obtained through further smoothing of the smoothed RSI line. When the smoothed RSI line crosses above the slow trailing line, it indicates short-term momentum is to the upside, and long trades may be taken. Conversely, when the smoothed RSI crosses below the slow trailing line, short-term momentum is to the downside, and short trades may be more appropriate.

• The QQE can serve as a trend filter. Values above 50 indicate a bullish market, while values below 50 indicate a bearish market. Long trades can only be taken when values are above 50, while short trades require values below 50.

• QQE values above 70 indicate overbought conditions, while values below 30 indicate oversold conditions. Long trades can be taken when the QQE crosses above the 30 line, while shorts can be taken when the QQE crosses below the 70 line.

• A divergence between the price and the QQE may signal upcoming reversals. In a bearish divergence, prices are setting higher highs while the QQE is setting lower highs, signalling an upcoming bearish reversal. In a bullish divergence, prices are setting lower lows while the QQE is setting higher lows, indicating a potential bullish reversal.

Final Words

The QQE indicator, occasionally recommended on trading forums, is not widely recognised for its profit potential. Its complexity and the belief that the standard RSI suffices contribute to its obscurity. Despite this, the QQE’s inclusion of extra lines and availability on most trading platforms make it adaptable. However, proper interpretation through training is crucial to avoid potential losses. Its versatility in any market, including Forex, is a significant benefit. Confirming QQE alerts with other indicators enhances trading decisions.