Introduction to the ITrend Indicator
Trend following and trend reversal strategies are probably some of the most popular types of trading strategies. As such, trend following and trend reversal signal indicators are some of the most sought after technical indicators, and the ITrend Indicator is one example of such trend following signal indicator.
What is the ITrend Indicator?
The ITrend Indictor is a trend following technical indicator which uses a pair of oscillating lines to identify momentum and trend reversals. It plots a green and red line which oscillates as a pair on a separate indicator window. Trend direction is identified based on how these two lines overlap and trend reversals are identified based on the crossing over of the two lines.
How the ITrend Indicator Works?
The ITrend Indicator uses a component of the Average Directional Movement Index (ADX) indicator, which are the two Directional Movement Index lines (DMI+) and (DMI-).
The DMI+ line, which is the green line, represents the bullish price movements, while the DMI- line, which is the red line, represents the bearish price movements.
Trend direction is bullish whenever the DMI+ line is above the DMI- line and bearish whenever the DMI+ line is below the DMI- line.
How to use the ITrend Indicator for MT4
The ITrend Indicator has several variables within its indicator settings which allows users to modify the sensitivity of the DMI+ and DMI- lines.
The ITrend Indicator is mainly a trend reversal signal indicator. However, it does tend to produce unreliable trade signals in a choppy market condition or ranging markets with a type price range. As such, it is best to use the ITrend Indicator crossover signals in confluence with a long-term trend. Traders can opt to trade the crossover signals solely in the direction of the long-term trend.
Buy Trade Setup
When to Enter?
Identify a currency pair that is in an uptrend scenario. Wait for price to pullback allowing the DMI+ line to temporarily drop below the DMI- line. Open a buy order as soon as the DMI+ line crosses above the DMI- line. Set the stop loss on the support below the entry candle.
When to Exit?
Close the trade as soon as price action shows signs of a bearish reversal.
Sell Trade Setup
When to Enter?
Identify a currency pair that is in a downtrend scenario. Wait for price to pullback allowing the DMI+ line to temporarily breach above the DMI- line. Open a sell order as soon as the DMI+ line crosses below the DMI- line. Set the stop loss on the resistance above the entry candle.
When to Exit?
Close the trade as soon as price action shows signs of a bullish reversal.
Conclusion
As with most trend following indicators, the ITrend Indicator can be susceptible to fake outs caused by market noise and price spikes that typically occur on choppy market conditions. It works best when traded in confluence with a bigger picture trend. As such, it is also a good idea to pair this indicator with a long-term trend indicator such as a 200-period moving average line.
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