Introduction to the Buy Sell Indicator for MT5
One concept that traders use when identifying trends and trend reversals is with the use of an Average True Range (ATR). The market trend is said to have reversed whenever price moves against a prior trend by a distance more than a multiple of the ATR. The Buy Sell Indicator is based on this concept.
What is the Buy Sell Indicator?
The Buy Sell Indicator is a custom technical indicator which is a trend following indicator. It plots dots that shift above and below price action to indicate trend direction. It plots the dots below price action whenever it detects that the market is in an uptrend, and above price action whenever it detects that the market is in a downtrend.
How the Buy Sell Indicator Works?
The Buy Sell Indicator uses a moving average line and an Average True Range (ATR) indicator to identify trend direction. It uses the moving average line as the starting point on which it would base where it would plot the dots from. The dots are plotted a distance from the moving average line based on the ATR. The dots shift above or below price action once a candle closes beyond the dots. This would signal that the market is about to reverse.
How to use the Buy Sell Indicator for MT5
This indicator has four variables which can be modified within its settings.
“MA_Period” refers to the number of periods on which the moving average line is based on.
“Smoothing method” refers to the type of moving average line used.
“Price” refers to point on a bar on which the price data is sourced from.
“ATR_Period” refers to the number of periods used on the ATR.
The Buy Sell Indicator can be used as a trend reversal signal indicator based on the shifting of its dots above or below price action. However, it is best used as a trend direction filter wherein traders would simply identify the direction of the trend using the Buy Sell Indicator and trade exclusively in the trend direction it indicates.
Buy Trade Setup
When to Enter?
Identify a market which is trending up using the Buy Sell Indicator dots. Wait for price to pullback near the dots. Open a buy order as soon as price action shows indications that the uptrend is about to resume. Set the stop loss on the support below the entry candle.
When to Exit?
Close the trade as soon as price action shows indications that it is about to reverse back down.
Sell Trade Setup
When to Enter?
Identify a market which is trending down using the Buy Sell Indicator dots. Wait for price to pullback near the dots. Open a sell order as soon as price action shows indications that the downtrend is about to resume. Set the stop loss on the resistance above the entry candle.
When to Exit?
Close the trade as soon as price action shows indications that it is about to reverse back up.
Conclusion
The Buy Sell Indicator is an excellent trend direction indicator. However, it somehow tends to show lagging signals when used as a trend reversal signal indicator. As such, it is best used as a trend direction filter indicator.
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