Normalized EMA Cycle (NEC)

Normalized EMA Cycle (NEC)
The Normalized EMA Cycle (NEC) is a versatile momentum and trend reversal tool designed to detect high-probability turning points and gauge the strength of price cycles.

It combines fast and slow Exponential Moving Averages (EMAs), dynamic normalization, and adaptive transparency to create clear, intuitive reversal signals on the chart.

🔹 How It Works
EMA Differencing
The NEC calculates the difference between a fast EMA and a slower EMA:

Fast EMA Length (default 6) captures short-term momentum.

Slow EMA Length (default 16) tracks broader trends.

The slope of this difference identifies accelerating or decelerating momentum.

Normalization to 0–100 Scale

The raw EMA difference is scaled relative to the recent Alpha Period range (default 6 bars).

This transforms the value into a normalized oscillator ranging between 0 and 100.

A 3-period Hull Moving Average (HMA) smooths this series to reduce noise.

Overbought and Oversold Thresholds

By default:

Overbought Level: 75

Oversold Level: 25

Crossovers of these levels are used to detect potential reversals.

Adaptive Alpha Adjustment

The normalized value is transformed into an “Alpha Schaff” line, dynamically shifting between price and normalized cycles.

This helps the model adjust to different volatility regimes.

Trend Reversal Logic

Bullish Reversal:

Normalized oscillator crosses above the Oversold Level.

EMA difference slope is positive.

Bearish Reversal:

Normalized oscillator crosses below the Overbought Level.

EMA difference slope is negative.

Additional confirmation comes when price crosses the Alpha Schaff line in the direction of momentum.

Dynamic Confidence Visualization

The indicator calculates a trend confidence score based on the normalized separation of the EMAs.

The transparency of reversal markers dynamically adjusts:

Strong trends = more opaque signals

Weak trends = more transparent signals

🔹 How to Use
✅ Entries

Long Signal: Aqua upward label appears below a bar.

Conditions:

Bullish reversal or price crossing above Alpha Schaff

Normalized slope is rising

Short Signal: Fuchsia downward label appears above a bar.

Conditions:

Bearish reversal or price crossing below Alpha Schaff

Normalized slope is falling

✅ Trend Strength

The less transparent the signal marker, the more significant the trend.

✅ Customization

Use the inputs to fine-tune sensitivity:

Shorter EMAs: Faster signals

Longer EMAs: Smoother trends

Alpha Period: Adjusts the lookback range for normalization

🟢 Best Practices
NEC is best used in combination with other trend confirmation tools (e.g., price structure, volume, or higher timeframe EMAs).

Avoid relying on signals in extremely low-volume or choppy ranges.

⚠️ Disclaimer
This script is intended for educational purposes only and does not constitute financial advice. Trading involves substantial risk, and you should consult your financial advisor before making any investment decisions.