Introduction to the Signal Bars Indicator
Momentum reversal signal indicators are very useful technical indicators as it provides traders a confirmation to open or close trades based on the direction of momentum.
The Signal Bars Indicator was developed to provide traders an objective indication of the direction of momentum using the concept of fractals.
What is the Signal Bars Indicator?
The Signal Bars Indicator is a momentum reversal signal indicator which was developed to help traders identify the direction of momentum and its potential trend reversals.
This indicator is a simple indicator which plots diamond symbols to indicate the direction of momentum, as well as its potential reversals. It plots the diamond symbols below a candle whenever it detects a bullish momentum and above a candle whenever it detects a bearish momentum.
Traders can use these diamond symbols as a momentum reversal entry signal. Traders can open a buy order whenever the indicator would start to plot diamond symbols below a candle, and a sell order whenever the indicator would start to plot diamond symbols above a candle, provided that the momentum reversal signals are in confluence with other technical indications.
How the Signal Bars Indicator Works?
The Signal Bars Indicator has a complex algorithm which detects momentum direction based on fractals and other complex formulas. It also uses the Open, High, Low, and Close of price within its formulas and compares the Highs and Lows with the formula. This allows the indicator to detect the potential momentum reversals while incorporating fractals within its algorithm.
How to use the Signal Bars Indicator for MT4
The Signal Bars Indicator has no options or variables which can be modified within its indicator settings. This is because its algorithm is fixed and has no modifiable variables. The only option that users can modify would be the color of the diamond symbols that the indicator would plot.
Buy Trade Setup
When to Enter?
Open a buy order if the Signal Bars Indicator would start to plot a diamond symbol below a price candle in confluence with other bullish momentum reversal indications.
When to Exit?
Close the trade as soon as the Signal Bars Indicator would start to plot a diamond symbol above a price candle.
Sell Trade Setup
When to Enter?
Open a sell order if the Signal Bars Indicator would start to plot a diamond symbol above a price candle in confluence with other bearish momentum reversal indications.
When to Exit?
Close the trade as soon as the Signal Bars Indicator would start to plot a diamond symbol below a price candle.
The Signal Bars Indicator has the potential to produce decent yields relative to the risk placed on the stop loss if the stop loss level is placed on the fractal. However, it also does tend to produce false signals whenever the market is forming a tight and choppy market range, which is common for most short-term momentum indicators. This is why it is very important to look for confluences between momentum reversal indications when using this indicator to have an improved probability of having a profitable trade.
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