In the field of financial investment, technical indicators have always been important tools for analyzing market trends and making investment decisions. The LON indicator, as one of the more prominent indicators, has attracted attention for its precise ability to capture and analyze market trends. So, what exactly is the LON indicator? How does it help investors make better investment decisions? The following will provide a detailed analysis.

1. What is the LON Indicator?

The LON indicator can be understood as a weighted volume indicator, primarily used for weighting the trends between closing prices. By filtering out short-term market fluctuations, the LON indicator can intuitively reflect the long-term trend of the market. In practical use, the calculation process of the LON indicator is relatively complex, involving multiple factors such as closing prices and trading volumes, which is why it is widely used in technical analysis for auxiliary decision-making.
To better understand the calculation and principles of the LON indicator, novice investors can start by studying professional financial books that explain the indicator formulas and calculation logic in detail. Additionally, many excellent analysis platforms and financial websites provide rich technical guidance and practical cases to help investors quickly master its practical applications.

2. The Role of the LON Indicator

1. Trend Judgment and Decision Support

The LON indicator is an effective tool for trend judgment. In situations where market trends are unclear, it can help investors identify the overall trend direction of the market. For example, when the LON indicator line crosses above its moving average, it can be seen as a buy signal, indicating that the market may experience an upward trend in the future; conversely, when the LON indicator line crosses below its moving average, it is a sell signal, suggesting that the market trend may decline.

2. Risk Control

The LON indicator also plays an important role in risk control. When market conditions are unstable, the fluctuations reflected by the LON indicator can help investors avoid potential risks in a timely manner. For instance, when the LON indicator fluctuates less during a volatile market, investors should remain cautious and avoid increasing risk due to frequent trading.

3. Monitoring Capital Trends

The LON indicator can also be used to capture changes in market capital trends. Due to its ability to weight trading volume, it can provide a more accurate picture of the inflow and outflow of major market funds. For example, a continuously rising LON indicator may indicate that major funds are beginning to push the market upward; while a continuous decline may suggest capital outflow from the market, indicating an increased risk of market decline.

3. How to Scientifically Apply in Combination with Other Indicators?

While using the LON indicator alone is already quite effective, combining it with other technical indicators can provide a more comprehensive judgment. For example, when used in conjunction with indicators like MACD and KDJ, the LON indicator can better validate the accuracy of market trend signals. For instance, when the signals from the LON indicator and MACD align, trading decisions are often more robust and reliable.

4. Custom Indicator · LON Indicator Effect

(Chart Binance-BTCUSDT Perpetual Contract 4-Hour Cycle)

(Chart OKX-ETHUSDT Perpetual Contract 4-Hour Cycle)

5. Custom Indicator · Script Source Code

// @version=2

// Get the closing price of the previous K-line  
LC = close[1];

// Calculate the sum of the 2-period trading volume, divided by the difference between the highest and lowest prices over 2 periods  
volTotal = sum(volume, 2)  
highTotal = highest(high, 2);  
lowTotal = lowest(low, 2);  
VID = 100 * volTotal / (highTotal - lowTotal)

// The difference between the closing price and LC, multiplied by VID  
RC = (close - LC) * VID;  
// Sum the values of RC across all K-lines  
LONG = cum(RC);

// Exponential moving average of LONG over 10 periods  
LONGMA1 = ema(LONG, 10);  
// Exponential moving average of LONG over 20 periods  
LONGMA2 = ema(LONG, 20);

// Long-term indicator: the difference between LONGMA1 and LONGMA2  
Lon = LONGMA1 - LONGMA2;  
// MA1 is the 10-period average of LONG  
MA1 = ma(Lon,10)  
// LONGMA: N-period average of Lon  
LONGMA = ma(Lon, 30);

// Plot MACD on the chart  
plot(MA1,title="MA1")  
plot(Lon, title='Lon', color='white', lineWidth=1, lineDash=[0], display=true );  
plot(LONGMA, title='LONGMA', color='rgba(255,0,0,1)', lineWidth=1, lineDash=[0], display=true );  
plotColumn(Lon, title='LonT');

// Create alerts  
alertcondition(Lon > 0, title='Long-term Indicator Signal', direction='buy');  
alertcondition(Lon < 0, title='Long-term Indicator Signal', direction='sell');

// Create trading strategy  
enterLong(Lon > 0, price='market', amount=1);  
exitLong(Lon < 0, price='market', amount=1);

6. Conclusion

The LON indicator is becoming increasingly important in investment analysis. It not only helps investors judge market trends but also provides strong support in risk management and market analysis. For investors looking to enhance their investment skills, learning and applying the LON indicator is undoubtedly an essential skill.

By continuously practicing and researching the LON indicator, investors can build more comprehensive investment strategies, seize every opportunity for market changes, and contribute to the appreciation of their wealth.

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