The Story Behind a Parabolic Curve Detector for Crypto and Legacy Markets
1. Thinking about Curves
A longstanding curiosity of mine has been the phenomena of parabolic takeoffs in markets. Information cascades, technological adoption patterns, network economies, small worlds in social networks, and so forth.
And one of the best places to study microcosms of parabolic “runs” is price action in markets. Markets, after all, are not linear machines. They are aggregators of information, and as such, they are also vivid behavioral systems, prone to bursts of acceleration and periods of deceptive stillness.
We talk about “trends” as if they’re straight lines, but in reality, powerful moves in either direction almost always follow curves.
The interesting challenge though is identifying such trends early. Detecting the beginning of that curve in real time, and knowing when it’s starting to roll over.
So, I set out to devise an indicator for the task, and the result is the Parabolic Run Detector (PRD). Born out of frustration with laggy trend-following tools and noisy momentum indicators, this detector is a hybrid model that applies first principles of price movement, behavioral confirmation, and time-sensitive risk awareness. Before we dive into how it works, let’s talk about why each of its parts exists in the first place.
2. What Is The PRD Indicator?
This isn’t just another momentum indicator. The Parabolic Run Detector is a multi-layered signal system built for TradingView that helps you identify when markets are shaping up for a parabolic move, and just as critically, when that move is given signs of fizzling out.
Rather than just build a whizz-bang indicator, which is neither my interest nor really my forte, what the PRD does is something better: it attempts to operationalize the ideas of trend velocity, equilibrium behavior, and momentum exhaustion.
It’s designed for both crypto and legacy markets, supports context-aware presets by timeframe, and gives you just enough tuning freedom without turning it into an exercise of shifting the onus on to you to fiddle with it until the indicator “fits” your charts, with all the baggage of priors that accompanies.
The Theory: Why This Indicator Works
Moves in markets are usually associated with changes in velocity, which is to say that they can speed up and hesitate. As a result, they tend to overextend, and then mean-revert. When they break into parabolic runs, the best traders know not just when to enter, but also when to start questioning the ride.
The PCD builds on these ideas with the following simple design cues:
- Log-price slope reflects real-world acceleration.
- Tenkan/Kijun clamp acts as a mean-reversion bias gauge.
- RSI behavior (slope and extension) gives us behavioral energy — not just overbought readings, but momentum slope.
Each of these components then feeds into a weighted scoring system, effectively spitting out a confidence score rather than just a binary “yes/no” signal.
3. How the Parabolic Run Detector Works
If you are a seasoned trader it may be worth your while seeing what the Parabolic Run Detector entails, before I explain the nuts and bolts. Your intuition might suggest its merits or flaws right away.
The essence is that the Parabolic Run Detector uses a combination of RSI and Ichimoku to create a comprehensive picture of the market.
Why? The rationale is simple.
RSI acts like a behavioral inertia gauge, telling you whether recent price moves have been emotionally charged in one direction. It allows you to see whether buyers or sellers have dominated the last few periods. Contrary to some perceptions, perhaps, it doesn’t care about price levels or volatility ranges. Instead, it just tells you if the market is emotionally leaning too far. Meanwhile, the Tenkan and Kijun lines of Ichimoku serve as a map of market topography, showing where recent high–low ranges have centered. So, it is useful to think of these levels as gravitational anchors. Price tends to revert to or respect them.
By applying both simultaneously, the ambition is gain a two-dimensional view of market structure within a single indicator.
Trader love the RSI because it capture a momentum signal. Ichimoku fans love it because it gives them a positional context. A market with high RSI and price extended above the Kijun is not just emotionally stretched, but also unanchored. Clearly this is a recipe for mean reversion or explosive continuation.
With a fusion of the two systems within the PRD, the ambition is to allows a user to detect when sentiment and structure are aligned. Or, more powerfully, when they are at odds, signaling possible inflection points.
So, essentially, each time a potential run begins, the PRD indicator:
- Measures the log-scale price slope (in other words, it accounts for speed and acceleration, Slope1 and Slope2);
- Checks for a wide clamp (Tenkan > Kijun, to get a sense of the disequilibrium in the market);
- Gauges RSI slope (the RSI is germane here, recall, because it is measuring extension in the market in terms of momentum of gains and losses, not in price deviation terms);
- Applies a user-configurable scoring threshold, and
- If conditions are met it then plots a green dot to mark the beginning of a prospective run
It also permits entering a caution window, based on a user-defined number of bars. During that time, if:
- Slope2 weakens,
- RSI remains extended, and
- Clamp stays wide
then a composite caution score triggers an orange dot. Given the inputs that the caution is considering, the dot isn’t meant to be a definitive hands- off alarm, but rather a soft suggestion that this run might be done.
4. Accommodating Investor Type and Timeframes
Markets behave differently depending on your trading style. So does the PRD.
- Scalper? (1–15m): You’ll care more about price velocity. Slope1 and slope2 matter. Reversion? Not so much.
- Swing Trader? (1h–4h): You want strong moves with context. Reversion awareness starts to matter. In other words, the “caution dots” are helpful.
- Investor? (Daily/Weekly): You care about confirmation. The Tenkan/Kijun relationship and RSI slope become more important than acceleration alone.
To support this, the indicator includes built-in presets that adapt weights based on:
- Timeframe
- Crypto vs. Legacy market context
You can override everything in Advanced Mode, but the defaults will serve you well out of the box. At least for testing whether it suffices…
Composite Scoring
A key reason for the elasticity that the indicator is able to provide is because it is drawing from components that themselves are savvy to the timeframes being assesed. And so, it is worth repeating that each component in the Parabolic Run Detector system, which are:
- Slope1 (speed),
- Slope2 (acceleration),
- RSI extension and slope, and
- Clamp behavior,
aren’t just averaged. They’re weighted, so your chart timeframe can influence how much each factor matters. It’s not overfitting, it’s common sense!
So, for example, on a BTC 4-hour chart, you might want more slope and less caution. On a Costco daily, it’s the opposite. Now you want to know when RSI is getting tired and price has deviated appreciably from mean.
6. A Discussion on the PRD‘s Pros and Cons
Let’s deal with what I think are clear strengths of the PRD.
1. Multidimensional Scoring System
Most indicators fire based on a single condition, perhaps an RSI threshold, a moving average crossover, or a MACD histogram expansion. This tool, by contrast, evaluates multiple dimensions of price behavior simultaneously (trend speed, momentum, disequilibrium, and reversion potential) and weights them based on the user’s timeframe and market type. This mimics how skilled discretionary traders think, and does its best to automate it.
2. Adaptivity Without Chaos
With built-in presets that adjust for shorter vs. longer timeframes and crypto vs. traditional equities, the PRD avoids the problem of “too many knobs”. It’s not fully rigid, but also not an overfitting playground, which is an easy pitfall for any trader. The PRD guides users toward setups that naturally matter more on the timeframe they’re trading.
3. Early Entry, Gentle Exit
In my limited experience, most systems lag. This one tries not to. By scoring slope1 (velocity) and slope2 (acceleration) of the log-price curve, we surface candidates before moving averages cross. And with the caution system, the indicator doesn’t just yell “SELL!”, it says, “Hey, maybe the party’s winding down.” This is a key point for any user of the PRD to understand. It’s not doing all your homework for you, but it’s giving you a good deal of assistance in completing it.
And, in the interest of total clarity, the PRD has limitations that you need to recognize.
1. Complexity for Novices
The PRD isn’t meant to be a dumbed-down version of its components, but, with multiple conditions and weightings under the hood, some traders may feel overwhelmed without understanding what slope1 or “clamp width” even means. That’s why the defaults are calibrated out of the box, but misuse or over-tinkering can lead to confusion or false signals. You really need some time with it and a good deal of experience.
2. Underperformance in Choppy Markets
Because the indicator looks for directional acceleration, it can underperform during sideways consolidation or range-bound environments. You might get false starts or few triggers at all, and this is a feature, not a bug. In those environments, you probably shouldn’t be chasing imaginary parabolas.
3. Parameter Sensitivity Across Assets
A slope threshold that works wonders on Bitcoin 4H might be useless on Costco daily. This isn’t just about price scale but behavioral volatility. Users must be aware that tuning matters, and presets are an informed starting point, not gospel.
7. Why Not Just Use RSI or Ichimoku?
This is a fair question to ask. And the answer is where things get a little mathematical and philosophical. Let’s deal with RSI first.
Recall that the RSI (Relative Strength Index) is based on relative average gains vs. losses over n periods. It’s simple and elegant, but it is oblivious to trend structure , meaning that it can be overbought in a rally that’s just getting started.
And, obviously, it also doesn’t account for acceleration, only recent directional dominance. PRD, by contrast, incorporates:
- the slope of RSI itself (not just its level) and to gauge acceleration or flattening,
- reversion sensitivity via dynamic scoring (say, RSI > 75 with price above Tenkan = caution, not confirmation)
The Ichimoku system is genius in its structure. The Tenkan-sen (shorter average of Higher Highs/Lower Lows midpoint) and Kijun-sen (longer Higher Highs/Lower Lows midpoint) mirror mean behavior without using raw closes.
The “clamp” width between Tenkan and Kijun can be seen as a proxy for disequilibrium in that, the farther apart they get, the more explosive the trend seems, but the more vulnerable it may become.
The PRD employs this clamp as a run condition (wide clamp = disequilibrium + energy) and a caution factor (clamp stays wide but RSI weakens = party might be ending)
Moving Averages, Divergence, and the Math of Parabolic Runs
It’s worth reminding ourselves that markets tend to trend when shorter-term behavior pulls away from longer-term behavior. A classic example would be the 9 EMA rising above the 21 EMA. But here’s the obvious insight:
A true parabolic move isn’t just when short > long… it’s when that gap is widening at an increasing rate.
That’s second derivative behavior, the hallmark of acceleration.
Mathematically, if:
- MA1 = short-term moving average (e.g. 9 EMA)
- MA2 = long-term moving average (e.g. 21 EMA)
Then Δ = MA1 – MA2 is the divergence. But the rate of change of Δ (i.e. its slope) and the acceleration of that slope (second derivative) is where the magic lies.
This is precisely what the PRD is modeling with:
- slope1: the first derivative of log(price) over N bars (velocity)
- slope2: the second derivative of log(price) (acceleration)
By scoring both, we’re not just saying: “price is rising”, we’re saying: “price is rising, and it’s rising faster than before, with structural imbalance (clamp) and momentum energy (RSI).”
This makes it fundamentally different from MA crossovers or raw RSI threshold. We’re tracking the rate at which the short-term is pulling away, and asking: “Is this the beginning of a moonshot or a blowoff top?”
8. A Use Case: Bitcoin on the Daily
The solid green dots mark the start of parabolic runs. Notice how most of these kicks happen early in sharp upward moves, right as price starts accelerating above the cloud and slope1 clears the threshold. This is where price “pulls away” fast. The faint green dots show continuation runs, spaced by at least 15 bars as per our settings. The idea of doing it this way was primarily to help prevent signal spam and force separation between meaningful moves.
Not the orange dots doing a fairly good job of appearing near local tops. These aren’t “sell now” signals, but warnings that conditions like RSI extension and persistent clamp width (without new acceleration) suggest the run may be topping out. (Sure, you can keep those handy and even add those on top of your chart, should you wish to check them individually).
A few notes:
- The early November 2024 run gets flagged just as BTC breaks its consolidation and enters lift-off.
- Around early January 2025, we see a flurry of orange markers just before BTC starts sliding from its local top, precisely the caution you’d have wanted.
- The March 2025 run is weaker (smaller green push), but still gets an entry call before a sustained rally resumes. The orange exit markers in late March occur before the pullback, giving a graceful off-ramp without a sharp sell signal.
9. Final Thoughts
The PRD isn’t a magic arrow, after all, but rather a perspective amplifier. It isn’t trying to replace your brain, but, one hopes, sharpen it. It gives you an edge when things go parabolic and a nudge when they go stale. Whether you’re day trading altcoins or building swing entries into quality names, this tool respects the market’s pace and adapts to your intent.
Give it a try. If it works for you, great. If not, hey, that’s fine too. NFA, DYOR.
-Prateek
Building a Smarter Trading Signal was originally published in Coinmonks on Medium, where people are continuing the conversation by highlighting and responding to this story.
