Reversal Bar Indicator for MT5

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Reversal Bar Indicator for MT5

Introduction to the Reversal Bar Indicator

Many traders are often faked-out by candlestick patterns whenever they try to anticipate short-term momentum reversals using candlestick patterns alone. This is because patterns can sometimes be very subjective. The Reversal Bar Indicator is a tool that traders can use to identify momentum reversals objectively using candlesticks.

What is the Reversal Bar Indicator?

The Reversal Bar Indicator is a custom technical indicator which identifies momentum reversal signals. It copies the price chart on its own indicator window with non-momentum reversal candles painted silver. Bearish momentum reversal candles on the other hand are painted red, while bullish momentum candles are painted blue.

Reversal Bar Indicator for MT5

How the Reversal Bar Indicator Works?

The Reversal Bar Indicator uses a complex formula within its indicator script to identify momentum reversal signals. Its formula uses the highs, lows, open, and close of price in order to arrive at the direction of the current candle’s momentum. It then paints the candle blue whenever it detects a bullish momentum reversal based on its formula, and red whenever it detects a bearish momentum reversal.

Given the formula of the Reversal Bar Indicator, it does somehow share some similarities with the Heiken Ashi Candlestick.

How to use the Reversal Bar Indicator for MT5

The Reversal Bar Indicator does not have any Settings tab wherein traders can modify and tweak the indicator. The only option that can be changed for this indicator would be the colors of the candlestick bars it paints.

The Reversal Bar Indicator is a momentum reversal signal indicator, and it should be used as such.

If used as a standalone signal indicator, the signals it would produce can be unreliable. However, when used in confluence with other trade setups, such as a bounce off of a dynamic support and resistance level, a breakout from a price pattern, or a reversal from a supply and demand zone, the signals it produces can be very reliable and responsive. As such, it is best to use this indicator as a confirmation signal or entry trigger to other trade setups.

Buy Trade Setup

When to Enter?

Identify a bullish trade setup such as bullish price patterns or reversals from support levels. Open a buy order on the confluence of the bullish trade setup signal and the blue candle signal indicated by the Reversal Bar Indicator. 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.

How to use the Reversal Bar Indicator for MT5 - Buy Trade

Sell Trade Setup

When to Enter?

Identify a bearish trade setup such as bearish price patterns or reversals from resistance levels. Open a sell order on the confluence of the bearish trade setup signal and the red candle signal indicated by the Reversal Bar Indicator. 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.

How to use the Reversal Bar Indicator for MT5 - Sell Trade

Conclusion

This indicator is very similar to the Heiken Ashi Candlesticks as it provides momentum reversal signals using the highs, lows, open, and close of candlesticks, and it also plots reversal signals using candlesticks. Its advantage compared to the Heiken Ashi Candlesticks is that traders can still see the price action and candlestick patterns since it does not overlap the traditional Japanese candlesticks.

As such, it does perform well as a momentum reversal confirmation signal.

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Reversal Bar Indicator for MT5

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