Trend Strength Indicator MT4
Technical analysis is the structure in which financial market traders (forex, stocks, etc.) study price activity. It is one of the different means of trading the markets. Since it involves the use and study of price movements and the right application of technical top 10 mt4 indicators and tools to achieve profits from trades. Hence, traders who employ technical analysis are known as Technical traders. While the average directional index (ADX) is applied in determining when the market price is trending strongly. It quantifies Trend strength of a currency pair. The Trend Strength Indicator MT4 measures Trend strength of a currency pair. And this is the thrust of this post.
Through a thorough study of the markets, trends and other price activities are discovered. Placing trades in the direction of a sturdy trend does well in minimizing risks and increasing profit potential.
Trend strength Indicator MT4
The Trend Strength Indicator MT4 works in an MT4 trading platform to quantify the strength of the trend for any currency pair. And show it in a detached window underneath the main trading chart. It is a technical tool that is built on a simple moving average, linear weighted moving average, exponential moving average and smoothed moving average.
The Trend Strength Indicator looks like the renowned MACD indicator. While on the other hand, tends to be more responsive to current price movements. The revealing of trends is made possible via the placing of its multi-colored lines and histograms.
Nonetheless, the nil (zero) reference line on the Indicator is a crucial point as it measures whether the price is bearish or bullish.
Its range of measurement goes from weak (10%) up to very strong (100%). They are categorized as:
1. 10% to 40%: Weak trend
2. 50% to 70%: Medium to a strong trend
3. 80% to 100%: Very strong trend
The Indicator can function on all timeframes.
The following chart displays the Indicator in action:
It can be seen that the Trend Strength Indicator in the above chart demonstrates the strength of the trend for the currency pair under review. According to market analysis reports, it has been identified that the markets only trend at nearly 30% of the entire time.
What this means is that the markets range a great deal of the time than it trends. And it would then be wise to advise a trader to watch for the ranges when they happen as they will birth the start of new sturdy trends.
Using Trend Strength Indicator
Buy Signal: take a long (buy) position if the multi-colored histograms (dodger blue, blue, crimson and pink) of the Trend Strength indicator break and stay beyond the zero signal level.
Buy Sell: take a short (sell) position if the multi-colored histograms (dodger blue, blue, crimson and pink) of the Indicator break and stay underneath the zero signal mark.
Exit buy trade: terminate all buy orders if, during a bullish trend, the gray line of the Indicator falls below the zero signal mark.
Exit sell trade: stop all sell orders if, during a bearish trend, the gray line of the Trend Strength Indicator rises above the zero signal mark.
Clues: The Indicator is a resourceful technical tool, and besides gauging market trends, it can as well be deployed to do the work of a divergence tool. A trader is free to make use of it for day trading, scalping and swing trading purposes.
Benefits of Applying Trend Strength Indicator MT4
1. Identification of Ranges:
Traders have over time known that applying the Indicator comes with many benefits. A significant benefit is that it assists the trader in identifying ranging periods (Ranges) in the markets.
Before any massive trends, the markets have continually been confined to actual tiny ranges, relatively contracted purposely to amass the power for the huge trend. Similarly, in recent times, many traders have decided to accept the ranges as a fragment of or their entire trading systems. Such Traders would then look out for them wherever they are occurring and then strategize for a breakout in any direction. To catch the trend in trading many advanced traders use a premium mt4 trend indicator.
Majority of the time, a tighter range or smaller contraction between the lows and highs in price, points to the bigger the trend that might come. Several successful traders were able to predict major trends this way accurately. And so, made exciting profits. Hence, identification of ranges is a useful skill in maximizing profits, and the Indicator does pretty well at that in addition to trends.
2. Identification of Trends:
It is the precise identification of price trends that assist traders in taking profit raking positions rightly. Varying colors are used by the Indicator to detect and visually alert a trader on the diverse periods in price.
The green color is shown when the price begins to move up very abruptly and stays as unmixed green when the price continues an upward trend. The Indicator starts to display yellow bars mixed with green bars as the sharp ascent of price begins to slow down to either a reversal or retracement.
The red color is used as the prices of a pair, or trading asset begins to move down sharply. The Indicator then continues printing the red color unmixed with yellow bars as long as prices continue trending downwards sharply. As the price starts to slow down, Indicator begins to print the red color mixed with a little yellow.
It implies that a change or reversal in trend might be forthcoming. Whenever a change in trend intensity starts becoming visible, the trader can either take incomplete profits or close their total position.
3. Can be used alone:
Though using the Indicator independently would not be recommended. A trader can make use of it alone to tell him/her actually when a trend may be getting weaker or slowing down. Great for traders who like to trade price retracements or fade price moves.
4. Detection of breakouts:
Trend Strength Indicator can reveal the direction of a breakout to a trader before it occurs. Breakout traders would find this Indicator greatly useful for their trades.
5. No repainting:
This Indicator does not repaint a session immediately it has ended. So the trader can assuredly take the signals it issues.
6. Ability to observe Timeframe Influences:
If the Indicator is used across many timeframes, it becomes easy to notice how price moves in smaller timeframes even move the much larger timeframes.
Besides, you will see how the bigger timeframes tend to bend the manner the lower timeframes move a majority of the time. This results in a superior level of accuracy.
7. No clogging of view:
An indicator is displayed in a different window of the chart. Hence, it doesn’t clog the charting space. So it lets the trader still to carry out his own analysis in a neat area.
Conclusion Of Trend Strength Indicator MT4
The Trend Strength Indicator MT4 is a histogram. It is deployed by financial traders to clearly detect. And to emphasize market trending times and other times when the markets are resting or ranging.
It ambiguously directs the trader on the strength in price activity in a single glance. Within a very short time, a trader can take accurate positions and make some profits. However, for a doubly assured strategy, we advise that it should be applied in combination with other indicators and tools. Our platform hosts other indicators and tools you can take advantage of so to maximize your profits.
And don’t forget to share your experience with us through the comment section below: