True Range Bands Indicator for MT4

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True Range Bands for MT4

Introduction to the True Range Bands Indicator

Band-based technical indicators can be very useful tools for traders because it has the capacity to provide a variety of information.

The True Range Bands indicator is an example of such band-based indicator that traders can easily use.

What is the True Range Bands Indicator?

The True Range Bands indicator is a custom technical indicator which is an envelope or band type of indicator. However, it is quite unique compared to most band-type of indicators because it makes use of the average range of price movements in its computation.

How the True Range Bands Indicator Works?

The True Range Bands indicator is composed of three lines, a dotted middle line, and two solid outer lines. The dotted middle line is basically a Simple Moving Average line based on the number of periods determined on the indicator settings. The outer lines are deviations from the middle line which are shifted up and down based on the Average True Range (ATR) multiplied by the multiplier set on the variable inputs.

True Range Bands for MT4

Variables such as the number of periods, the multiplier for the deviation, and the moving average shift can be changed on the indicator settings.

How the True Range Bands Indicator Works

How to Use the True Range Bands Indicator for MT4

Just as with most band-type of indicator, the True Range Bands is also very versatile. It can be used for identifying volatility, momentum, trend, as well as overbought and oversold price conditions.

Since the middle line of the True Range Bands is a moving average, it can also be used to identify trends. In an uptrend price action would typically stay above the middle line, while in a downtrend price action would usually stay below the middle line.

Since the outer lines are deviations from the middle line based on the ATR, the expansion and contraction of the bands can be used to determine volatility. An expanding True Range Bands would indicate increasing volatility, while a contracting band would indicate a decreasing volatility.

Candles breaking outside of the True Range Bands with strong momentum is also indicative of a potential momentum breakout especially coming from a tight market range.

Inversely, price rejections formed as price touches the outer line is indicative of a potential mean reversal. This is because the outer lines are markers for overbought and oversold price levels.

Buy Trade Setup

When to Enter?

Identify a market with a tight market range. Enter a buy order as soon as a momentum breakout candle breaks above the resistance line and closes above the upper line of the True Range Bands. Set the stop loss on the support below the entry candle.

When to Exit?

Close the trade as soon as a candle closes below the middle line of the True Range Bands.

How to Use the True Range Bands Indicator for MT4 - Buy Trade

Sell Trade Setup

When to Enter?

Identify a market with a tight market range. Enter a sell order as soon as a momentum breakdown candle breaks below the support line and closes below the lower line of the True Range Bands. Set the stop loss on the resistance above the entry candle.

When to Exit?

Close the trade as soon as a candle closes above the middle line of the True Range Bands.

How to Use the True Range Bands Indicator for MT4 - Sell Trade

Conclusion

The True Range Bands indicator is a versatile technical indicator that can give so much information using just three lines.

Traders can use the signals it produces as a supplement to a bigger picture trade setup.

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True Range Bands for MT4

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