Introduction to the Slope Direction Line Indicator
One of the ways traders identify trend direction and trend reversals is based on the slope of a moving average line. This is because moving average lines tend to slope towards the direction where price action generally is. This is the concept behind the Slope Direction Line indicator.
What is the Slope Direction Line Indicator?
The Slope Direction Line is a trend following technical indicator which is based on a modified moving average line.
It plots a modified moving average line which is relatively smooth yet responsive at the same time.
The moving average line that the Slope Direction Line indicator plots changes color depending on the direction of the trend it detects. It plots a blue line whenever it detects a bullish momentum, and red whenever it detects a bearish momentum.
How the Slope Direction Line Indicator Works?
The Slope Direction Line indicator detects trend direction based on the concept of using the slope of a moving average line as a basis for identifying the trend direction. As such, the Slope Direction Line indicator changes the color of the modified moving average line as soon as its slope changes. It plots a blue line whenever the moving average line is in an upward slope, and a red line whenever the moving average line is in a downward slope.
How to use the Slope Direction Line Indicator for MT4
The Slope Direction Line has several variables which can be modified to tweak its sensitivity.
“Period” refers to the number of periods on which the modified moving average line is based on.
“MA_method” refers to the type of modified moving average line used.
“Applied_price” refers to the source of the price data on each bar.
It can be used as a trend direction filter wherein traders would trade exclusively in the trend direction indicated by the Slope Direction Line.
It can also be used as a trend reversal entry signal wherein traders would use the changing of the color of the lines as a basis for opening and closing trades. However, it would be best to use this trend reversal signal in confluence with other trend reversal indications or patterns.
Buy Trade Setup
When to Enter?
Identify a support zone where price may reverse. Open a buy order as soon as the Slope Direction Line changes to blue. Set the stop loss below the support level.
When to Exit?
Close the trade as soon as the Slope Direction Line changes to red.
Sell Trade Setup
When to Enter?
Identify a resistance zone where price may reverse. Open a sell order as soon as the Slope Direction Line changes to red. Set the stop loss above the resistance level.
When to Exit?
Close the trade as soon as the Slope Direction Line changes to blue.
Conclusion
As mentioned earlier, the Slope Direction Line is a trend following technical indicator and it can excel as such. It would also be best if the trend reversal signals are incorporated just as an entry signal on areas where you are expecting a possible trend reversal.
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