Introduction to the Two MA with Signals Indicator
Confluence of trend reversal signals is often a key factor when trying to identify trend reversals. This is because confluences tend to increase the likelihood of a profitable trade.
The Two MA with Signals indicator is an example of a trend reversal signal indicator based on confluences.
What is the Two MA with Signals Indicator?
The Two MA with Signals indicator is a custom trend following technical indicator which provides trend indications and trend reversal signals based on a combination of moving averages and an underlying MACD signal.
How the Two MA with Signals Indicator Works?
The Two MA with Signals indicator has three main components. It has two moving average lines wherein one is a short-term moving average line set as a 28-period modified moving average line, and the other is a long-term 144-period modified moving average line. The third component is called the signal, which based on the indicator’s script is derived from an underlying modified Moving Average Convergence and Divergence (MACD) signal.
The indicator plots the two moving average lines wherein the short-term moving average is yellow, while the long-term moving average is turquoise.
It also indicates the long-term signal using shaded bars overlayed on the price chart. The area within the bars are shaded dark blue whenever it detects a bullish trend signal, and maroon whenever it detects a bearish trend signal.
How to use the Two MA with Signals Indicator for MT4
The Two MA with Signals indicator can be used as a trend reversal signal indicator or as a trend direction filter indicator.
Trend direction can be identified based on a confluence of how the two moving average lines intersect and the color of the overlayed signal bars. Traders can then opt to trade exclusively in the direction of the indicated trend.
As a trend reversal signal indicator, traders can use the crossing over of the two moving average lines as a trend reversal signal provided that it is in confluence with a reversal signal coming from the overlayed colored bars.
The indicator however allows the various components to be modified within the indicator settings.
Buy Trade Setup
When to Enter?
Open a buy order on the confluence of trend reversal signals based on the crossing of the yellow moving average line above the turquoise line and the changing of the signal bars shade to dark blue. Set the stop loss on the support below the entry candle.
When to Exit?
Close the trade as soon as the yellow line crosses below the turquoise line.
Sell Trade Setup
When to Enter?
Open a sell order on the confluence of trend reversal signals based on the crossing of the yellow moving average line below the turquoise line and the changing of the signal bars shade to maroon. Set the stop loss on the resistance above the entry candle.
When to Exit?
Close the trade as soon as the yellow line crosses above the turquoise line.
Conclusion
The Two MA with Signals indicator can provide long-term trend reversal signals with the potential to run and produce huge profits. However, these signals will not always be accurate. As such, it is best to trade these signals in confluence with price action and other technical analysis reversal setups.
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