The trading strategy known as "Didi Index" was created by the Brazilian analyst Odir Aguiar, also known as Didi. It involves plotting three simple moving averages (SMA3, SMA8, SMA20) with different periods on a chart to observe potential reversal points.
Logic of the algorithm:
- The algorithm verifies if the values of the three simple moving averages (SMA3, SMA8, and SMA20) are within the range of the last candle on the chart. This ensures that the moving averages are calculated based on recent price data.
- The algorithm fires a bullish signal when the following conditions are met:
- SMA3 (3-period simple moving average) is greater than SMA8 (8-period simple moving average).
- SMA8 (8-period simple moving average) is greater than SMA20 (20-period simple moving average).
- The configuration is pre-set to use 1-hour candles for the chart, and the algorithm recommends not going below 30-minute candles for better accuracy.
- For additional confirmation, traders can consider combining the Didi Index with a volume increase indicator. The increased trading volume during the occurrence of the bullish signal can provide additional confidence in the potential reversal.