Absolute Strength Histogram indicator for MT4
The Absolute strength histogram indicator, as the name suggests is designed for the MT4 trading platform. The indicator works as a histogram and is used to plot the absolute strength of the price action in a histogram format.
The indicator is used to determine the absolute strength of the currency or the commodity chart that it is applied to. The indicator sits in the sub-window of the MT4 trading platform and combines both a histogram and a moving average line.
Traders use the absolute strength indicator as a way to determine the strength of the sessions to which it is applied. The indicator automatically shifts and changes depending on the time frame to which it is being applied.
In a way, the absolute strength indicator might resemble other histograms such as the awesome oscillator or the MACD as well. But the main difference is that the Absolute strength indicator looks to the price action rather than other indicators.
Buy and sell signals are generated based on the strength of the instrument and the way it is, relative to the average that is plotted on the chart. Therefore, the Absolute strength indicator can sometimes be used as a way to trade the markets.
However, despite the fact that the indicator might seem like a lucrative way to trade the markets, it is always essential that you also utilize other trading indicators or technical strategies in order to build a trading strategy.
Relying solely on the absolute strength indicator can lead to potential losses while trading. So, if you want to experiment with the absolute strength indicator, it is recommended that you first use this on a demo trading account before applying this to the real markets.
How does the absolute strength histogram indicator work?
The Absolute strength histogram indicator is a custom indicator. You can download the indicator from this article and then install it into the MT4’s indicator folder. Restart your MT4 trading platform and refresh the indicators to activate it.
Once you see the histogram indicator in your terminal, you can drag and drop the indicator onto the chart of your choice. You will be presented with the indicator’s configuration settings as shown below.
MT4 Absolute Strength Histogram Indicator
The above picture shows the configuration window. Below are further details and explanations on the various settings that you see.
Mode: The default is set to zero. But can change the value to 1. When you choose 0, the RSI method is applied and when you choose 1, the Stochastics method is applied.
Length: The default setting is 9. This is basically the lookback period for the indicator. When you change this value, the Absolute Strength Histogram indicator recalibrates itself depending on the number of bars or sessions to look back upon. The values can also change depending on the time frame of your choice.
Smooth: This is the setting to check the period of smoothing. The default is set to 1, which means that the smoothing period is one. You can change these values but remember that a higher smoothing factor means that the indicator will tend to lag a lot.
Signal: This setting deals with the lookback period of the signal line or the average line. The default is set to 4. Just as with the smoothing factor, the number you input here will typically make the indicator either very sensitive to price or it will lag.
Price: This configuration deals with the setting of the price point to calculate. As you might know, there are four types of prices, the open, high, low and close. Besides these, you also have the median price which is the average of the high, low and close. To adjust these settings, the following numbers have to be used: 0 = Close, 1 = Open, 2 = High, 3 = Low, 4 = Median, 5 = Typical, 6 = Weighted. Changing these numbers doesn’t really make a big difference or give you that edge you are looking for. It is recommended that you stick with the closing price to keep things simple
ModeMA: The default setting is three. This simply means that mode of the moving average. For moving averages, you know that there are different kinds. Starting with 0 which is simple moving average, 1 being the exponential moving average, 2 being the smoothed moving average and 3 being the linear weighted moving average. Ideally you should use either the simple or the exponential moving average
Mode Histo: This setting allows you to configure how the histogram is to be plotted. Switching from values of 0 through 5, you can enable or disable the signal line, the average line or even set the histogram to oscillator around the zero line as well. This configuration setting basically depends on how you want the histogram to work.
Once you have the indicator configured and apply it to the chart, this is how it looks.
MT4 Absolute Strength Histogram indicator
The absolute strength indicator as you can see how the strength of the price action. When price action is bullish, you will see that the histogram tends to breakout from the signal line, indicating that the strength is strong. And likewise, the histogram also shows when the trend is weak.
Traders use this indicator in a number of different ways such as buying and selling when the strength rises and falls and vice versa. You can also see the buy and sell signals when there is a bullish or a bearish crossover of the moving average and the signal line.
Additional filters can be applied such as whether the histogram is bullish (blue) or bearish (red). The absolute strength histogram indicator is relatively simple in its application. This indicator by no means will give you an edge in the markets. The indicator simply reflects how the markets are position and displays the same via the means of the histogram and the average and the signal line that is plotted on the indicator.