Profitability Visualization with Bid-Ask Spread Approximation

2024年12月30日

Overview
The "Profitability Visualization with Bid-Ask Spread Approximation" indicator is designed to assist traders in assessing potential profit and loss targets in relation to the current market price or a simulated entry price. It provides flexibility by allowing users to choose between two methods for calculating the offset from the current price:

• Bid-Ask Spread Approximation: The indicator attempts to estimate the bid-ask spread by using the highest (high) and lowest (low) prices within a given period (typically the current bar or a user-defined timeframe) as proxies for the ask and bid prices, respectively. This method provides a dynamic offset that adapts to market volatility.
  
• Percentage Offset: Alternatively, users can specify a fixed percentage offset from the current price. This method offers a consistent offset regardless of market conditions.
  

Key Features

• Dual Offset Calculation Methods: Choose between a dynamic bid-ask spread approximation or a fixed percentage offset to tailor the indicator to your trading style and market analysis.
  
• Entry Price Consideration: The indicator can simulate an entry price at the beginning of each trading session (or the first bar on the chart if no sessions are defined). This feature enables a more realistic visualization of potential profit and loss levels based on a hypothetical entry point.
  
• Profit and Loss Targets: When the entry price consideration is enabled, the indicator plots profit target (green) and loss target (red) lines. These lines represent the price levels at which a trade entered at the simulated entry price would achieve a profit or incur a loss equivalent to the calculated offset amount.
  
• Offset Visualization: Regardless of whether the entry price is considered, the indicator always displays upper (aqua) and lower (fuchsia) offset lines. These lines represent the calculated offset levels based on the chosen method (bid-ask approximation or percentage offset).
  
• Customization: Users can adjust the percentage offset, toggle the bid-ask approximation and entry price consideration, and customize the appearance of the lines through the indicator's settings.
  

Inputs

• Pine Script®
  A boolean (checkbox) input that determines whether to use the bid-ask spread approximation (true) or the percentage offset (false). Default is false.
  
• Pine Script®
  A float input that allows users to specify the percentage offset to be used when useBidAskApproximation is false. The default value is 0.63.
  
• Pine Script®
  A boolean input that enables the consideration of a simulated entry price for calculating and displaying profit and loss targets. Default is true.
  

Calculations

• Bid-Ask Approximation (if enabled):
  Pine Script®
  Approximates the bid price using the lowest price (low) of the current period.
  Pine Script®
  Approximates the ask price using the highest price (high) of the current period.
  Pine Script®
  Calculates the approximate spread.
  
  
• Offset Amount:
  Pine Script®
  Determines the offset amount based on the selected method. If useBidAskApproximation is true, the offset is half of the approximated spread; otherwise, it's the current closing price (close) multiplied by the percentageOffset.
  
  
• Entry Price (if enabled):
  Pine Script®
  Initializes a variable to store the entry price.
  Pine Script®
  Checks if entry price consideration is enabled.
  Pine Script®
  Checks if the current bar is the first bar of a new session.
  Pine Script®
  Sets the entryPrice to the closing price of the first bar of the session.
  
  
• Profit and Loss Targets (if entry price is considered):
  Pine Script®
  Calculates the profit target price level.
  Pine Script®
  Calculates the loss target price level.
  

Plotting

• Profit Target Line: Plotted in green (color.green) with a dashed line style (plot.style_linebr) and increased linewidth (linewidth=2) when considerEntryPrice is true.
  
• Loss Target Line: Plotted in red (color.red) with a dashed line style (plot.style_linebr) and increased linewidth (linewidth=2) when considerEntryPrice is true.
  
• Upper Offset Line: Always plotted in aqua (color.aqua) to show the offset level above the current price.
  
• Lower Offset Line: Always plotted in fuchsia (color.fuchsia) to show the offset level below the current price.
  

Limitations

• Approximation: The bid-ask spread approximation is based on high and low prices and may not perfectly reflect the actual bid-ask spread of a specific broker, especially during periods of high volatility or low liquidity.
  
• Simplified Entry: The entry price simulation is basic and assumes entry at the beginning of each session. It does not account for specific entry signals or order types.
  
• No Order Execution: This indicator is purely for visualization and does not execute any trades.
  
• Data Discrepancies: The high and low values used for approximation might not always align with real-time bid and ask prices due to differences in data aggregation and timing between TradingView and various brokers.
  

Disclaimer
This indicator is for educational and informational purposes only and should not be considered financial advice. Trading involves substantial risk, and past performance is not indicative of future results. Always conduct thorough research and consider your own risk tolerance before making any trading decisions. It is recommended to combine this indicator with other technical analysis tools and a well-defined trading strategy.