Hurst Divergence Indicator

Hurst Divergence Indicator

Hurst Divergence Indicator generation III is modern indicator with complex mathematic algorithm (BJF Trading Group innovation). You will see divergenses on the chart and indicator. Arrows painted above/below the open bar and not in the past. You can see when actually you can trade. It is never to late! Signals based on closed bars so the arrows above/below open bar never disappear.

Hurst Exponent Divergence  Theory

In fractal geometry, the generalized Hurst exponent, named H in honor of both Harold Edwin Hurst (1880–1978) and Ludwig Otto Hölder (1859–1937) by Benoît Mandelbrot (1924-2010), is referred to as the "index of dependence," and is the relative tendency of a time series either to regress strongly to the mean or to cluster in a direction.

The Hurst exponent is used as a measure of the long term memory of time series, i.e. the autocorrelation of the time series. Where a value of 0 < H < 0.5 indicates a time series with negative autocorrelation (e.g. a decrease between values will probably be followed by an increase), and a value of 0.5 < H < 1 indicates a time series with positive autocorrelation (e.g. an increase between values will probably be followed by another increase). A value of H=0.5 indicates a true random walk, where it is equally likely that a decrease or an increase will follow from any particular value (e.g. the time series has no memory of previous values)

The three principles of hurst exponent :

Value 0.5 – 1 = whatever is happening now is likely to continue
Value 0 – 0.5 = whatever is happening now is likely to reverse
Value around 0.5 = likely to go in any direction

More information: 

http://en.wikipedia.org/wiki/Hurst_exponent

Recomeneded book:

Mandelbrot, Benoît B., The (Mis)Behavior of Markets, A Fractal View of Risk, Ruin and Reward (Basic Books, 2004), pp. 186-195

Related Article "Hurst Exponent Divergence"

Hurst Divergence Indicator - Short explanation

Metatrader Indicator Hurst Divergence indicates fractal divergence by Hurst indicator. When divergence appears between Hurst Indicator and the price, it indicates a high probability that the current trend will finish soon. A signal to buy is when a new Low-fractal is formed below the previous one and a corresponding Hurst Indicator value is higher than the previous one. A signal to sell is when a new Up-fractal is formed above the previous one and a corresponding Hurst Indicator value is lower than the previous value. The indicator has a lot of customizable settings.