Apeiron Fair Value Bands

2023年7月6日

The Apeiron Fair Value Bands take into account a given MA and determine a Fair Value Area (FVA) for the price of a certain asset. The script plots a MA and a tolerance ribbon for it, as well as 2 bands (preset to 1 Standard deviations and 2 Standard deviations respectively, which can be manually changed) with a tolerance ribbon as well.

This creates 3 areas of interest:

• The MA ribbon
  
• The inside of the first upper and lower band (1 standard deviation) where price should stay within around 68% percent of the time according to the normal distribution
  
• The inside of the second upper and lower band (2 standard deviations) where price should stay within around 95% percent of the time according to the normal distribution
  

Taking this into account, Fair Value analysis can be done:

• Premium and Discount Prices: From a very simplistic point of view, when price is below a MA it can be considered to be at a discount and when it is above at a premium. Combining that idea with the levels given by the bands, we can determine if we are buying at premium or at a discount, specially on HTF and when considering investing, thus allowing to enter or exit the market with a higher probability of being on the right side of the trend and at a good level. As seen on the example, buying or selling at the highlighted levels would have been profitable with little drawdown.
• VAH & VAL: (1 Standard Deviation Bands) Same as a Market Profile, price will stay in here "most" of the time. And particularly during ranging periods, they will provide potential revesal levels. As well, once prices breaks out of it, depending of the reaction to the second band, we can consider it a deviation or the beggining of a new trend. During strong trends, the bands can also serve as a correction support as the MA would do
• New Fair Vaue Range: Once a new trend has begun, it will often slide on or break through Band 2, which can be interpreted as price creating a new Fair Value Range low or high. As seen on the chart, once price breaks out, those levels tend to be respected and relevant during corrections. I must make it very clear that this is just an analytical feature meant to be used in confluence with S/R, Supply & Demand, FVGs, Fibs or others. While it can be accurate sometimes, it might not be other times and be only "close".
• Exhaustions: I call exhaustions to the scenarios when price keeps going up/down but it fails to keep pushing the fair value area with it. This indicates weakness in the trend and a potential reversal or correction. These appear on all Timeframes and symbols and are very good indications of tops and bottoms, specially after strong rallies or crashes. In the latter cases, waiting for price to re-enter it's FVA, provides great entries at the Bands levels.

Other features / Suggested Uses:

• Middle levels: On the setup menu you can select different Standard deviation settings for each band including: 0.5, 1, 1.5, 2, 2.5 and 3. While the most relevant settings are 1 & 2, having their middle levels on the chart can provide extra levels for very tight ranges or just in general potential reversal levels.
• Multi Timeframe & Multi symbol: The bands work on very low TF as well as High TF, though on HTF it might be limited by the MA length settings and the historical data of the symbol. It is important to note that each symbol and market type will have its own ideal MA and Bands settings.
• Multi Bands Confluence: Same as you would use a short and long MA in a single setup, you can do the same with the bands and the confluence of levels can be very accurate.
• Multi Timeframe Confluence: One of the best ways to use the bands so far is by using it in confluence with itself in other TFs, when price moves sharply into a confluent level given by multiple TFs, it is more likely for price to reverse there.

Most of the examples show a 200 SMA, but depending on what and how you are trading a shorter or longer MA might be a better fit for you. As well, if you are trading ranges, a VWMA might be much better, and if you are following a trend the EMA could be the better option.

I also want to make it clear that the bands can but are NOT meant to be a standalone indicator. They are meant to be used for confluence with other strategies, systems or indicators.

2023年11月28日

版本注释

• Added Pro features to the free version such as:
  
  
• Presets:
  The multiplier for each band, the width of each tolerance ribbon and the individual colors of each band can all be individually selected. However, to make the user's experience as smooth as possible, FVA multipliers, Ribbon width and colors can be preset and modified all at the same time with the most basic and ideal settings. This allows for quick customization options as well as personalized detailed custom settings.
  
  
• Show only Lower or Upper bands:
  This setting is meant for scouting for discounts and premiums across the board. By only showing bands on one side it cleans up the chart and makes it easier to spot important levels on only one side of the price. This can be very useful when looking for swing opportunities or when following a particular trend to only focus on potential entries for it.
  
  
• The MA Lab:
  
  The Apeiron Bands utilizes a MA Lab to generate the most customizable MAs possible. It allows combining up to 3 different MAs, where each MA can be single, double or triple (same process as creating a DEMA or TEMA). As well each MA can be given more or less weight in the calculation of the final MA. Besides it’s features, the MA Lab allows the user to select only one MA and stick to basic settings and MA types if preferred.
  
  When to use the MA Lab:
  If you wanted a reactive MA (EMA) which was also volume weighted, you can then combine it with a VWMA and get a VW-EMA.
  If you want a more reactive VWMA you can double or triple it. Then in order to make it smoother you combine it with a SMMA. Finally maybe you want to use it to follow trends closely so you also combine it with a HMA to take momentum into consideration.