Introduction to the Prior Day Open Close Line Indicator
One of the key price points that seasoned traders track is the closing price of the day. This is because it allows them to observe how the market behaved during the day and what it may indicate for the following day. The Prior Day Open Close Line Indicator is an indicator which uses this price point as a key support or resistance level where price may react on.
What is the Prior Day Open Close Line Indicator?
The Prior Day Open Close Line Indicator is an indicator which identifies the close of the previous day’s price as a possible horizontal support or resistance line which price may break out from or reverse from. This indicator plots a dot-dot-dashed line marking the close of the previous day.
How the Prior Day Open Close Line Indicator Works?
The Prior Day Open Close Line Indicator retrieves the previous day’s close price from the broker price feed. It then plots a horizontal dot-dot-dashed line up to the end of the current day. This would mark the horizontal support or resistance line based on the previous day’s close.
How to use the Prior Day Open Close Line Indicator for MT4
The Prior Day Open Close Line Indicator has a couple of variables which traders can use to modify the indicator’s timing. Of the two, the “TimeZoneOfData” is the most important.
The “TimeZoneOfData” field refers to the time zone the server uses. This shifts the hour which the indicator uses as the close of day price based on the server’s time zone.
There are several ways to trade this support or resistance line. It could either be used as a support or resistance line where price could reverse from intraday. It could also be a breakout price level wherein price could rally or drop with strong momentum after breaking this level.
The example below shows a breakout from the close price levels wherein the trades are opened after the pullback which may occur after the initial breakout.
Buy Trade Setup
When to Enter?
Wait for price to break above the previous day’s close price line then pullback towards the line. Open a buy order as soon as a bullish reversal pattern develops along the line. Set the stop loss below the pattern.
When to Exit?
Close the trade as soon as price action shows signs of a possible bearish reversal.
Sell Trade Setup
When to Enter?
Wait for price to break below the previous day’s close price line then pullback towards the line. Open a sell order as soon as a bearish reversal pattern develops along the line. Set the stop loss above the pattern.
When to Exit?
Close the trade as soon as price action shows signs of a possible bullish reversal.
Conclusion
This indicator provides a unique opportunity for trading breakouts and reversals. It is uncommon for traders to use the close of the previous day as a horizontal support or resistance level. However, looking historical price action, there are some instances wherein this line could work as an effective support or resistance level.
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