Introduction to the MA BBands Indicator
Most trading strategies rely on a confluence of technical indications and signals to identify an objective trade setup. Some would be based on a confluence of technical indicator signals, while some would incorporate price action, price patterns, and candlestick patterns.
Some reversal signal indicators are based on this concept using confluences as a basis for a reversal signal. The MA BBands Indicator is one of these indicators that use confluences as a basis for identifying potential reversals.
What is the MA BBands Indicator?
The MA BBands is a custom technical indicator which is a mean reversal signal indicator based on the Bollinger Bands.
This indicator plots a Bollinger Band similar to that of a regular Bollinger Band indicator. The difference is that this indicator plots signal arrows whenever it detects a probable mean reversal signal. It plots a blue arrow pointing up to indicate a bullish mean reversal, and a red arrow pointing down to indicate a bearish mean reversal.
How the MA BBands Indicator Works?
The MA BBands Indicator uses a combination of a Bollinger Band overbought or oversold filter and a Moving Average of Oscillator (OsMA) Indicator reversal signal to identify its mean reversal signals.
This indicator presets its underlying OsMA indicator as a fast moving oscillator which is very sensitive to price movements causing it to detect reversal signals faster.
However, this indicator also filters out reversal signals which are not beyond the outer lines of the Bollinger Bands. This creates mean reversal signals coming from overbought or oversold price levels.
How to use the MA BBands Indicator for MT4
This indicator has a few variables which can be tweaked. These variables either control the underlying Bollinger Bands or the Moving Average of Oscillator.
This indicator can be used as a mean reversal signal indicator by itself. Traders can use the mean reversal arrows as a basis for opening and closing trades based on a mean reversal setup and aim for a take profit at the middle line of the Bollinger Bands or at the opposite outer line of the Bollinger Bands. Traders can also ride the reversal until price action shows signs of reversal. However, the signals work best when in confluence with a reversal candlestick pattern.
Buy Trade Setup
When to Enter?
Open a buy order on the confluence of a bullish mean reversal signal identified by the MA BBands Indicator and a bullish reversal candlestick pattern. Set the stop loss below the pattern.
When to Exit?
Close the trade as soon as price closes above the upper outer line of the Bollinger Bands.
Sell Trade Setup
When to Enter?
Open a sell order on the confluence of a bearish mean reversal signal identified by the MA BBands Indicator and a bearish reversal candlestick pattern. Set the stop loss above the pattern.
When to Exit?
Close the trade as soon as price closes below the lower outer line of the Bollinger Bands.
The MA BBands Indicator is an excellent example of an indicator that provides decent mean reversal signals based on a confluence of an indicator which identifies oversold and overbought price levels, and an indicator that can be used to identify reversals. This is why this indicator tend to have mean reversal signals that have a decent blend of accuracy and potential yield per trade. However, this indicator is still best used on conjunction with price action since some of its signals occur while in conflict with price action.
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