This indicator is based on Consensio Trading System by Tyler Jenks. It is used for measuring the Directionality of the market.
According to this trading system, you start by laying 3 Simple Moving Averages:
A Long-Term Moving Average (LTMA).
A Short-Term Moving Average (STMA).
A Price Moving Average (Price).
*The "Price" should be A relatively short Moving Average in order to reflect the current price.
What is Direction(D)? Each Moving Average at any given time is pointing in a certain direction. It can either go Up, Down, or it can be in a Consolidation state. That's why, each Direction(D) is assigned to a score :
Up = 2
Consolidation = 1
Down = 0
For example, if LTMA is directed Up, then D[LTMA]=2.
What is Influence(I)? Generally, The fluctuation of the "Price" tends to have less influence on the "LTMA" than the fluctuation of the "STMA". this is why each Moving Average has different degree of Influence(I):
LTMA = 9
STMA = 3
Price = 1
Moving Average Score To calculate the score of a Moving Average, you Multiply the Moving Average Direction(D) by its Influence(I). For example, if LTMA is directed Up then the score of this Moving Average is 18.
What is Directionality? Directionality is the sum of all 3 Moving Averages score minus 13. For example, if the score of LTMA=18 and STMA=6 and Price=2, then Directionality is equal to 13. Also, if the score of LTMA=0 and STMA= 0 and Price=0, then Directionality is equal to -13. When Directionality is bigger than 0 the Directionality is Bullish. When Directionality is smaller than 0 the Directionality is Bearish.
Conclusion Consensio Directionality Indicator helps us measure the Directionality of the market. Knowing the Directionality of the market helps us build better trading strategies.
Recommendations
Different Moving Averages may suit you better when trading different assets on different time periods. You can go into the indicator settings and change the Moving Averages values if needed.
you should also use the "Consensio Relativity Indicator" In order to Understand the Market state. While using both of my Consensio indicators together, please make sure that the Moving Averages on both of them are set to the same values