Quantum Market Harmonics [QMH]

# Quantum Market Harmonics [QMH] - TradingView Script Description

## 📊 OVERVIEW

Quantum Market Harmonics (QMH) is a comprehensive multi-dimensional trading indicator that combines four independent analytical frameworks to generate high-probability trading signals with quantifiable confidence scores. Unlike simple indicator combinations that display multiple tools side-by-side, QMH synthesizes temporal analysis, inter-market correlations, behavioral psychology, and statistical probabilities into a unified confidence scoring system that requires agreement across all dimensions before generating a confirmed signal.

---

## 🎯 WHAT MAKES THIS SCRIPT ORIGINAL

### The Core Innovation: Weighted Confidence Scoring

Most indicators provide binary signals (buy/sell) or display multiple indicators separately, leaving traders to interpret conflicting information. QMH's originality lies in its weighted confidence scoring system that:

1. **Combines Four Independent Methods** - Each framework (described below) operates independently and contributes points to an overall confidence score
2. **Requires Multi-Dimensional Agreement** - Signals only fire when multiple frameworks align, dramatically reducing false positives
3. **Quantifies Signal Strength** - Every signal includes a numerical confidence rating (0-100%), allowing traders to filter by quality
4. **Adapts to Market Conditions** - Different market regimes activate different component combinations

### Why This Combination is Useful

Traditional approaches suffer from:
- **Single-dimension bias**: RSI shows oversold, but trend is still down
- **Conflicting signals**: MACD says buy, but volume is weak
- **No prioritization**: All signals treated equally regardless of strength

QMH solves these problems by requiring multiple independent confirmations and weighting each component's contribution to the final signal. This multi-dimensional approach mirrors how professional traders analyze markets - not relying on one indicator, but waiting for multiple pieces of evidence to align.

---

## 🔬 THE FOUR ANALYTICAL FRAMEWORKS

### 1. Temporal Fractal Resonance (TFR)

**What It Does:**
Analyzes trend alignment across four different timeframes simultaneously (15-minute, 1-hour, 4-hour, and daily) to identify periods of multi-timeframe synchronization.

**How It Works:**
- Uses `request.security()` with `lookahead=barmerge.lookahead_off` to retrieve confirmed price data from each timeframe
- Calculates "fractal strength" for each timeframe using this formula:
```
Fractal Strength = (Rate of Change / Standard Deviation) × 100
```
This creates a momentum-to-volatility ratio that measures trend strength relative to noise
- Computes a Resonance Index when all four timeframes show the same directional bias
- The index averages the absolute strength values when all timeframes align

**Why This Method:**
Fractal Market Hypothesis suggests that price patterns repeat across different time scales. When trends align from short-term (15m) to long-term (Daily), the probability of trend continuation increases substantially. The momentum/volatility ratio filters out low-conviction moves where volatility dominates direction.

**Contribution to Confidence Score:**
- TFR Bullish = +25 points
- TFR Bearish = +25 points (to bearish confidence)
- No alignment = 0 points

---

### 2. Cross-Asset Quantum Entanglement (CAQE)

**What It Does:**
Analyzes correlation patterns between the current asset and three reference markets (Bitcoin, US Dollar Index, and Volatility Index) to identify both normal correlation behavior and anomalous breakdowns that often precede significant moves.

**How It Works:**
- Retrieves price data from BTC (BINANCE:BTCUSDT), DXY (TVC:DXY), and VIX (TVC:VIX) using confirmed bars
- Calculates Pearson correlation coefficient between the main asset and each reference:
```
Correlation = Covariance(X,Y) / (StdDev(X) × StdDev(Y))
```
- Computes an Intermarket Pressure Index by weighting each reference asset's momentum by its correlation strength:
```
Pressure = (Corr₁ × ROC₁ + Corr₂ × ROC₂ + Corr₃ × ROC₃) / 3
```
- Detects "correlation breakdowns" when average correlation drops below 0.3

**Why This Method:**
Markets don't operate in isolation. Inter-market analysis (developed by John Murphy) recognizes that:
- Crypto assets often correlate with Bitcoin
- Risk assets inversely correlate with VIX (fear gauge)
- Dollar strength affects commodity and crypto prices

When these normal correlations break down, it signals potential regime changes. The term "quantum" reflects the interconnected nature of these relationships - like quantum entanglement where distant particles influence each other.

**Contribution to Confidence Score:**
- CAQE Bullish (positive pressure, stable correlations) = +25 points
- CAQE Bearish (negative pressure, stable correlations) = +25 points (to bearish)
- Correlation breakdown = Warning marker (potential reversal zone)

---

### 3. Adaptive Market Psychology Matrix (AMPM)

**What It Does:**
Classifies the current market emotional state into six distinct categories by analyzing the interaction between momentum (RSI), volume behavior, and volatility acceleration (ATR change).

**How It Works:**
The system evaluates three metrics:
1. **RSI (14-period)**: Measures overbought/oversold conditions
2. **Volume Analysis**: Compares current volume to 20-period average
3. **ATR Rate of Change**: Detects volatility acceleration

Based on these inputs, the market is classified into:
- **Euphoria**: RSI > 80, volume spike present, volatility rising (extreme bullish emotion)
- **Greed**: RSI > 70, normal volume (moderate bullish emotion)
- **Neutral**: RSI 40-60, declining volatility (balanced state)
- **Fear**: RSI 40-60, low volatility (uncertainty without panic)
- **Panic**: RSI < 30, volume spike present, volatility rising (extreme bearish emotion)
- **Despair**: RSI < 20, normal volume (capitulation phase)

**Why This Method:**
Behavioral finance principles (Kahneman, Tversky) show that markets follow predictable emotional cycles. Extreme psychological states often mark reversal points because:
- At Euphoria/Greed peaks, everyone bullish has already bought (no buyers left)
- At Panic/Despair bottoms, everyone bearish has already sold (no sellers left)

AMPM provides contrarian signals at these extremes while respecting trends during Fear and Greed intermediate states.

**Contribution to Confidence Score:**
- Psychology Bullish (Panic/Despair + RSI < 35) = +15 points
- Psychology Bearish (Euphoria/Greed + RSI > 65) = +15 points
- Neutral states = 0 points

---

### 4. Time-Decay Probability Zones (TDPZ)

**What It Does:**
Creates dynamic support and resistance zones based on statistical probability distributions that adapt to changing market volatility, similar to Bollinger Bands but with enhancements for trend environments.

**How It Works:**
- Calculates a 20-period Simple Moving Average as the basis line
- Computes standard deviation of price over the same period
- Creates four probability zones:
- **Extreme Upper**: Basis + 2.5 standard deviations (≈99% probability boundary)
- **Upper Zone**: Basis + 1.5 standard deviations
- **Lower Zone**: Basis - 1.5 standard deviations
- **Extreme Lower**: Basis - 2.5 standard deviations (≈99% probability boundary)
- Dynamically adjusts zone width based on ATR (Average True Range):
```
Adjusted Upper = Upper Zone + (ATR × adjustment_factor)
Adjusted Lower = Lower Zone - (ATR × adjustment_factor)
```
- The adjustment factor increases during high volatility, widening the zones

**Why This Method:**
Traditional support/resistance levels are static and don't account for volatility regimes. TDPZ zones are probability-based and mean-reverting:
- Price has ≈99% probability of staying within extreme zones in normal conditions
- Touches to extreme zones represent statistical outliers (high-probability reversal opportunities)
- Zone expansion/contraction reflects volatility regime changes
- ATR adjustment prevents false signals during unusual volatility

The "time-decay" concept refers to mean reversion - the further price moves from the basis, the higher the probability of eventual return.

**Contribution to Confidence Score:**
- Price in Lower Extreme Zone = +15 points (bullish reversal probability)
- Price in Upper Extreme Zone = +15 points (bearish reversal probability)
- Price near basis = 0 points

---

## 🎯 HOW THE CONFIDENCE SCORING SYSTEM WORKS

### Signal Generation Formula

QMH calculates separate Bullish and Bearish confidence scores each bar:

**Bullish Confidence (0-100%):**
```
Base Score: 20 points
+ TFR Bullish: 25 points (if all 4 timeframes aligned bullish)
+ CAQE Bullish: 25 points (if intermarket pressure positive)
+ AMPM Bullish: 15 points (if Panic/Despair contrarian signal)
+ TDPZ Bullish: 15 points (if price in lower probability zones)
─────────
Maximum Possible: 100 points
```

**Bearish Confidence (0-100%):**
```
Base Score: 20 points
+ TFR Bearish: 25 points (if all 4 timeframes aligned bearish)
+ CAQE Bearish: 25 points (if intermarket pressure negative)
+ AMPM Bearish: 15 points (if Euphoria/Greed contrarian signal)
+ TDPZ Bearish: 15 points (if price in upper probability zones)
─────────
Maximum Possible: 100 points
```

### Confirmed Signal Requirements

A **QBUY** (Quantum Buy) signal generates when:
1. Bullish Confidence ≥ User-defined threshold (default 60%)
2. Bullish Confidence > Bearish Confidence
3. No active sell signal present

A **QSELL** (Quantum Sell) signal generates when:
1. Bearish Confidence ≥ User-defined threshold (default 60%)
2. Bearish Confidence > Bullish Confidence
3. No active buy signal present

### Why This Approach Is Different

**Example Comparison:**

Traditional RSI Strategy:
- RSI < 30 → Buy signal
- Result: May buy into falling knife if trend remains bearish

QMH Approach:
- RSI < 30 → Psychology shows Panic (+15 points)
- But requires additional confirmation:
- Are all timeframes also showing bullish reversal? (+25 points)
- Is intermarket pressure turning positive? (+25 points)
- Is price at a statistical extreme? (+15 points)
- Only when total ≥ 60 points does a QBUY signal fire

This multi-layer confirmation dramatically reduces false signals while maintaining sensitivity to genuine opportunities.

---

## 🚫 NO REPAINT GUARANTEE

**QMH is designed to be 100% repaint-free**, which is critical for honest backtesting and reliable live trading.

### Technical Implementation:

1. **All Multi-Timeframe Data Uses Confirmed Bars**
```pinescript
tf1_close = request.security(syminfo.tickerid, "15", close[1], lookahead=barmerge.lookahead_off)
```
Using `close[1]` instead of `close[0]` ensures we only reference the previous confirmed bar, not the current forming bar.

2. **Lookahead Prevention**
```pinescript
lookahead=barmerge.lookahead_off
```
This parameter prevents the function from accessing future data that wouldn't be available in real-time.

3. **Signal Timing**
Signals appear on the bar AFTER all conditions are met, not retroactively on the bar where conditions first appeared.

### What This Means for Users:

- **Backtest Accuracy**: Historical signals match exactly what you would have seen in real-time
- **No Disappearing Signals**: Once a signal appears, it stays (though price may move against it)
- **Honest Performance**: Results reflect true predictive power, not hindsight optimization
- **Live Trading Reliability**: Alerts fire at the same time signals appear on the chart

The dashboard displays "✓ NO REPAINT" to confirm this guarantee.

---

## 📖 HOW TO USE THIS INDICATOR

### Basic Trading Strategy

**For Trend Followers:**

1. **Wait for Signal Confirmation**
- QBUY label appears below a bar = Confirmed bullish entry opportunity
- QSELL label appears above a bar = Confirmed bearish entry opportunity

2. **Check Confidence Score**
- 60-70%: Moderate confidence (consider smaller position size)
- 70-85%: High confidence (standard position size)
- 85-100%: Very high confidence (consider larger position size)

3. **Enter Trade**
- Long entry: Market or limit order near signal bar
- Short entry: Market or limit order near signal bar

4. **Set Targets Using Probability Zones**
- Long trades: Target the adjusted upper zone (lime line)
- Short trades: Target the adjusted lower zone (red line)
- Alternatively, target the basis line (yellow) for conservative exits

5. **Set Stop Loss**
- Long trades: Below recent swing low minus 1 ATR
- Short trades: Above recent swing high plus 1 ATR

**For Mean Reversion Traders:**

1. **Wait for Extreme Zones**
- Price touches extreme lower zone (dotted red line below)
- Price touches extreme upper zone (dotted lime line above)

2. **Confirm with Psychology**
- At lower extreme: Look for Panic or Despair state
- At upper extreme: Look for Euphoria or Greed state

3. **Wait for Confidence Build**
- Monitor dashboard until confidence exceeds threshold
- Requires patience - extreme touches don't always reverse immediately

4. **Enter Reversal**
- Target: Return to basis line (yellow SMA 20)
- Stop: Beyond the extreme zone

**For Position Traders (Longer Timeframes):**

1. **Use Daily Timeframe**
- Set chart to daily for longer-term signals
- Signals will be less frequent but higher quality

2. **Require High Confidence**
- Filter setting: Min Confidence Score 80%+
- Only take the strongest multi-dimensional setups

3. **Confirm with Resonance Background**
- Green tinted background = All timeframes bullish aligned
- Red tinted background = All timeframes bearish aligned
- Only enter when background tint matches signal direction

4. **Hold for Major Targets**
- Long trades: Hold until extreme upper zone or opposite signal
- Short trades: Hold until extreme lower zone or opposite signal

---

## 📊 DASHBOARD INTERPRETATION

The QMH Dashboard (top-right corner) provides real-time market analysis across all four dimensions:

### Dashboard Elements:

1. **✓ NO REPAINT**
- Green confirmation that signals don't repaint
- Always visible to remind users of signal integrity

2. **SIGNAL: BULL/BEAR XX%**
- Shows dominant direction (whichever confidence is higher)
- Displays current confidence percentage
- Background color intensity reflects confidence level

3. **Psychology: [State]**
- Current market emotional state
- Color coded:
- Orange = Euphoria (extreme bullish emotion)
- Yellow = Greed (moderate bullish emotion)
- Gray = Neutral (balanced state)
- Purple = Fear (uncertainty)
- Red = Panic (extreme bearish emotion)
- Dark red = Despair (capitulation)

4. **Resonance: [Value]**
- Multi-timeframe alignment strength
- Positive = All timeframes bullish aligned
- Negative = All timeframes bearish aligned
- Near zero = Timeframes not synchronized
- Emoji indicator: 🔥 (bullish resonance) ❄️ (bearish resonance)

5. **Intermarket: [Value]**
- Cross-asset pressure measurement
- Positive = BTC/DXY/VIX correlations supporting upside
- Negative = Correlations supporting downside
- Warning ⚠️ if correlation breakdown detected

6. **RSI: [Value]**
- Current RSI(14) reading
- Background colors: Red (>70 overbought), Green (<30 oversold)
- Status: OB (overbought), OS (oversold), or • (neutral)

7. **Status: READY BUY / READY SELL / WAIT**
- Quick trade readiness indicator
- READY BUY: Confidence ≥ threshold, bias bullish
- READY SELL: Confidence ≥ threshold, bias bearish
- WAIT: Confidence below threshold

### How to Use Dashboard:

**Before Entering a Trade:**
- Verify Status shows READY (not WAIT)
- Check that Resonance matches signal direction
- Confirm Psychology isn't contradicting (e.g., buying during Euphoria)
- Note Intermarket value - breakdowns (⚠️) suggest caution

**During a Trade:**
- Monitor Psychology shifts (e.g., from Fear to Greed in a long)
- Watch for Resonance changes that could signal exit
- Check for Intermarket breakdown warnings

---

## ⚙️ CUSTOMIZATION SETTINGS

### TFR Settings (Temporal Fractal Resonance)
- **Enable/Disable**: Turn TFR analysis on/off
- **Fractal Sensitivity** (5-50, default 14):
- Lower values = More responsive to short-term changes
- Higher values = More stable, slower to react
- Recommendation: 14 for balanced, 7 for scalping, 21 for position trading

### CAQE Settings (Cross-Asset Quantum Entanglement)
- **Enable/Disable**: Turn CAQE analysis on/off
- **Asset 1** (default BTC): Reference asset for correlation analysis
- **Asset 2** (default DXY): Second reference asset
- **Asset 3** (default VIX): Third reference asset
- **Correlation Length** (10-100, default 20):
- Lower values = More sensitive to recent correlation changes
- Higher values = More stable correlation measurements
- Recommendation: 20 for most assets, 50 for less volatile markets

### Psychology Settings (Adaptive Market Psychology Matrix)
- **Enable/Disable**: Turn AMPM analysis on/off
- **Volume Spike Threshold** (1.0-5.0x, default 2.0):
- Lower values = Detect smaller volume increases as spikes
- Higher values = Only flag major volume surges
- Recommendation: 2.0 for stocks, 1.5 for crypto

### Probability Settings (Time-Decay Probability Zones)
- **Enable/Disable**: Turn TDPZ visualization on/off
- **Probability Lookback** (20-200, default 50):
- Lower values = Zones adapt faster to recent price action
- Higher values = Zones based on longer statistical history
- Recommendation: 50 for most uses, 100 for position trading

### Filter Settings
- **Min Confidence Score** (40-95%, default 60%):
- Lower threshold = More signals, more false positives
- Higher threshold = Fewer signals, higher quality
- Recommendation: 60% for active trading, 75% for selective trading

### Visual Settings
- **Show Entry Signals**: Toggle QBUY/QSELL labels on chart
- **Show Probability Zones**: Toggle zone visualization
- **Show Psychology State**: Toggle dashboard display

---

## 🔔 ALERT CONFIGURATION

QMH includes four alert conditions that can be configured via TradingView's alert system:

### Available Alerts:

1. **Quantum Buy Signal**
- Fires when: Confirmed QBUY signal generates
- Message includes: Confidence percentage
- Use for: Entry notifications

2. **Quantum Sell Signal**
- Fires when: Confirmed QSELL signal generates
- Message includes: Confidence percentage
- Use for: Entry notifications or exit warnings

3. **Market Panic**
- Fires when: Psychology state reaches Panic
- Use for: Contrarian opportunity alerts

4. **Market Euphoria**
- Fires when: Psychology state reaches Euphoria
- Use for: Reversal warning alerts

### How to Set Alerts:

1. Right-click on chart → "Add Alert"
2. Condition: Select "Quantum Market Harmonics"
3. Choose alert type from dropdown
4. Configure expiration, frequency, and notification method
5. Create alert

**Recommendation**: Set alerts for Quantum Buy/Sell signals with "Once Per Bar Close" frequency to avoid intra-bar false triggers.

---

## 💡 BEST PRACTICES

### For All Users:

1. **Backtest First**
- Test on your specific market and timeframe before live trading
- Different assets may perform better with different confidence thresholds
- Verify that the No Repaint guarantee works as described

2. **Paper Trade**
- Practice with signals on a demo account first
- Understand typical signal frequency for your timeframe
- Get comfortable with the dashboard interpretation

3. **Risk Management**
- Never risk more than 1-2% of capital per trade
- Use proper stop losses (not just mental stops)
- Position size based on confidence score (larger size at higher confidence)

4. **Consider Context**
- QMH signals work best in clear trends or at extremes
- During tight consolidation, false signals increase
- Major news events can invalidate technical signals

### Optimal Use Cases:

**QMH Works Best When:**
- ✅ Markets are trending (up or down)
- ✅ Volatility is normal to elevated
- ✅ Price reaches probability zone extremes
- ✅ Multiple timeframes align
- ✅ Clear inter-market relationships exist

**QMH Is Less Effective When:**
- ❌ Extremely low volatility (zones contract too much)
- ❌ Sideways choppy markets (conflicting timeframes)
- ❌ Flash crashes or news events (correlations break down)
- ❌ Very illiquid assets (irregular price action)

### Session Considerations:

- **24/7 Markets (Crypto)**: Works on all sessions, but signals may be more reliable during high-volume periods (US/European trading hours)
- **Forex**: Best during London/New York overlap when volume is highest
- **Stocks**: Most reliable during regular trading hours (not pre-market/after-hours)

---

## ⚠️ LIMITATIONS AND RISKS

### This Indicator Cannot:

- **Predict Black Swan Events**: Sudden unexpected events invalidate technical analysis
- **Guarantee Profits**: No indicator is 100% accurate; losses will occur
- **Replace Risk Management**: Always use stop losses and proper position sizing
- **Account for Fundamental Changes**: Company news, economic data, etc. can override technical signals
- **Work in All Market Conditions**: Less effective during extreme low volatility or major news events

### Known Limitations:

1. **Multi-Timeframe Lag**: Uses confirmed bars (`close[1]`), so signals appear one bar after conditions met
2. **Correlation Dependency**: CAQE requires sufficient history; may be less reliable on newly listed assets
3. **Computational Load**: Multiple `request.security()` calls may cause slower performance on older devices
4. **Repaint of Dashboard**: Dashboard updates every bar (by design), but signals themselves don't repaint

### Risk Warnings:

- Past performance doesn't guarantee future results
- Backtesting results may not reflect actual trading results due to slippage, commissions, and execution delays
- Different markets and timeframes may produce different results
- The indicator should be used as a tool, not as a standalone trading system
- Always combine with your own analysis, risk management, and trading plan

---

## 🎓 EDUCATIONAL CONCEPTS

This indicator synthesizes several established financial theories and technical analysis concepts:

### Academic Foundations:

1. **Fractal Market Hypothesis** (Edgar Peters)
- Markets exhibit self-similar patterns across time scales
- Implemented via multi-timeframe resonance analysis

2. **Behavioral Finance** (Kahneman & Tversky)
- Investor psychology drives market inefficiencies
- Implemented via market psychology state classification

3. **Intermarket Analysis** (John Murphy)
- Asset classes correlate and influence each other predictably
- Implemented via cross-asset correlation monitoring

4. **Mean Reversion** (Statistical Arbitrage)
- Prices tend to revert to statistical norms
- Implemented via probability zones and standard deviation bands

5. **Multi-Timeframe Analysis** (Technical Analysis Standard)
- Higher timeframe trends dominate lower timeframe noise
- Implemented via fractal resonance scoring

### Learning Resources:

To better understand the concepts behind QMH:
- Read "Intermarket Analysis" by John Murphy (for CAQE concepts)
- Study "Thinking, Fast and Slow" by Daniel Kahneman (for psychology concepts)
- Review "Fractal Market Analysis" by Edgar Peters (for TFR concepts)
- Learn about Bollinger Bands (for TDPZ foundation)

---

## 🔄 VERSION HISTORY AND UPDATES

**Current Version: 1.0**

This is the initial public release. Future updates will be published using TradingView's Update feature (not as separate publications). Planned improvements may include:

- Additional reference assets for CAQE
- Optional machine learning-based weight optimization
- Customizable psychology state definitions
- Alternative probability zone calculations
- Performance metrics tracking

Check the "Updates" tab on the script page for version history.

---

## 📞 SUPPORT AND FEEDBACK

### How to Get Help:

1. **Read This Description First**: Most questions are answered in the detailed sections above
2. **Check Comments**: Other users may have asked similar questions
3. **Post Comments**: For general questions visible to the community
4. **Use TradingView Messaging**: For private inquiries (if available)

### Providing Useful Feedback:

When reporting issues or suggesting improvements:
- Specify your asset, timeframe, and settings
- Include a screenshot if relevant
- Describe expected vs. actual behavior
- Check if issue persists with default settings

### Continuous Improvement:

This indicator will evolve based on user feedback and market testing. Constructive suggestions for improvements are always welcome.

---

## ⚖️ DISCLAIMER

This indicator is provided for **educational and informational purposes only**. It does **not constitute financial advice, investment advice, trading advice, or any other type of advice**.

**Important Disclaimers:**

- You should **not** rely solely on this indicator to make trading decisions
- Always conduct your own research and due diligence
- Past performance is not indicative of future results
- Trading and investing involve substantial risk of loss
- Only trade with capital you can afford to lose
- Consider consulting with a licensed financial advisor before trading
- The author is not responsible for any trading losses incurred using this indicator

**By using this indicator, you acknowledge:**
- You understand the risks of trading
- You take full responsibility for your trading decisions
- You will use proper risk management techniques
- You will not hold the author liable for any losses

---

## 🙏 ACKNOWLEDGMENTS

This indicator builds upon the collective knowledge of the technical analysis and trading community. While the specific implementation and combination are original, the underlying concepts draw from:

- The Pine Script community on TradingView
- Academic research in behavioral finance and market microstructure
- Classical technical analysis methods developed over decades
- Open-source indicators that demonstrate best practices in Pine Script coding

Special thanks to TradingView for providing the platform and Pine Script language that make indicators like this possible.

---

## 📚 ADDITIONAL RESOURCES

**Pine Script Documentation:**
- Official Pine Script Manual: tradingview.com/pine-script-docs/

**Related Concepts to Study:**
- Multi-timeframe analysis techniques
- Correlation analysis in financial markets
- Behavioral finance principles
- Mean reversion strategies
- Bollinger Bands methodology

**Recommended TradingView Tools:**
- Strategy Tester: To backtest signal performance
- Bar Replay: To see how signals develop in real-time
- Alert System: To receive notifications of new signals

---

**Thank you for using Quantum Market Harmonics. Trade safely and responsibly.**