Buy sell indicator MT4 explained
The buy sell indicator is a technical trading indicator that plots the buy and sell arrows on the chart. At first glance, the buy sell indicator looks to be a trend following indicator.
Depending on whether the trend is bullish or bearish, the indicator plots a line similar to a moving average indicator and changes color.
The buy sell indicator also comes with lines on every session which looks to be where stops could be placed. There isn’t much information available about how exactly the indicator works. However, many traders prefer to use the buy sell indicator for various reasons.
As the name suggests, the buy sell indicator for MT4 is designed to work on the MT4 trading platform. Given that the MT4 trading platform is widely known in the forex markets, this indicator is ideally suited to trade the spot forex brokers.
In the first chart below shows the buy sell indicator in its simplest form. We did not make any changes to the settings. The name for this indicator comes from the fact that the buy and sell arrows are plotted on the chart.
Figure 1 – MT4 Buy Sell Indicator on chart
As you can see the buy sell indicator tends to capture the trends and also points out potential highs or lows where your stops can be placed. A quick glance at the indicator shows that it works best when the markets are trending.
However, when there is a small period of sideways consolidation, the indicator can lead to potential losses. This makes the indicator similar to other technical indicators such as the parabolic stop and reverse indicator for example, which also looks to work in the same way.
The parabolic SAR works best when the markets are trending and gives potential price levels where the stops can be placed. When the stop is hit and price starts to reverse direction, you can take the opposite sell signal.
The buy sell indicator works across any time frame which gives rise to some technical trading strategies such as using multiple time frame analysis or using this method alongside other trend following strategies such as the Ichimoku trading system.
Configuring the buy sell indicator MT4
The configuration of the MT4 buy sell indicator does not have much settings. You can simply drag and drop the indicator onto your chart. The indicator will change signals when you switch from one timeframe to another.
Figure 2: MT4 Buy sell indicator configuration window
This means that the configuration is fairly simple, but at the same time nothing much happens beyond that. Due to the fact that the buy sell indicator can show you where to place your stops, this indicator can be handy to show exactly this.
In a way, the buy sell indicator MT4 works as a way to remove risk from your trades. As and when price evolves, you can simply move your stops along to the points highs or lows that are pointed out by the indicator.
There is a chance that your stops will get hit abnormally, especially during periods. This can be seen from the next chart in Figure 3.
Figure 3: MT4 buy sell indicator – Stops hit during small consolidation
In the above chart you can see that the indicator fairly signaled a downtrend. After price moved just a few pips from the entry, you can see that there was a small period of consolidation that lasted over four one-hour sessions.
During this consolidation, the buy sell indicator for MT4 signaled a buy. However, quickly, the trend changed as the prevailing bearish trend resumed.
If you were to trade this leg by moving the stops as pointed out by the MT4 buy sell indicator, then you would get stopped out abnormally, just before the strongest part of the trend emerged.
On the other hand, when the trend is strong, the indicator works best. If you look to Figure 3 on the right side, you can see how the strong bullish candlesticks is represented by the strong bullish trend.
Placing stops in such a move would see the trade locking in quite a bit of profits.
And here in lies the problem, which is to follow the signals blindly on this indicator or whether to use additional validation.
It is always ideal to make use of the MT4 buy sell indicator with your existing trading strategies or using other technical indicators.
MT4 buy sell indicator – Trading Strategies
Despite its shortcomings, the MT4 buy sell indicator can act like an additional validation tool. In this section, we will take a look at some methods how you can use this indicator.
You can apply the indicator to an existing trading system that you might already have, or alternately, you can also create some simple methods. Bear in mind that the strategies presented here are not fully tested but only give a broader perspective on how you can use this indicator.
Buy sell indicator strategy with divergence
We will start with divergence because this is a good trading strategy. When there is a divergence between price and the oscillator, you can expect to see a strong retracement or at times a reversal.
But the problem with reversal is that you really wouldn’t know when to trade. Sometimes, despite there being divergence on the charts, price tends to move in the same direction. This can leave your early positions at risk.
So how can the MT4 buy sell indicator address this situation?
By adding the indicator to the charts alongside divergence, you can take a position when the buy sell indicator triggers a signal.
The chart below shows an example of a bullish divergence that was formed.
Figure 4: Buy sell indicator MT4 with divergence
You can see that the indicator triggers a buy signal indicating that price would reverse. After the reversal, there is a modest pullback to price.
Following this a buy signal is triggered, which could be where long positions could be taken. The buy sell indicator can be a additional tool to validate the reversal in the divergence in this case.
Buy sell indicator with support and resistance
Besides divergence, you can also use the buy sell indicator for MT4 to trade based off support and resistance levels. The first part involves identifying the support and resistance levels.
Then after you add the buy sell indicator, you can then wait for validation.
The next chart below shows the support and resistance levels plotted on the chart.
Figure 5: Support/Resistance level trading with buy sell indicator MT4
After the initial resistance level was set up, the resistance turned support level was breached, you can see that the buy sell indicator for MT4 signaled a bearish move. Price gradually falls and is on track to test the next lower level of support.
Besides the above two methods, traders can also employ a number of techniques where the buy sell indicator can act as a validation tool.
Buy sell indicator MT4 – Conclusion
The configuration window of the buy sell indicator is very simple. In fact, most of the settings you see has to do with sending alerts via email or pop up rather than configuring the indicator settings itself.
This lack of configuration makes the buy sell indicator somewhat limited in scope.
Besides adding the indicator to your charts, there isn’t much that you can do. Traders would know that when it comes to technical trading indicators, some amount of flexibility is required. Some markets are more trending than the others. Thus, using the same common settings across different currency pairs does not offer an edge in the market.
Still, it is surprising to note that the buy sell indicator is the most sought after indicator, which goes to show why most retail traders lose money.
Using an indicator that virtually gives no details on how it is plotted but for the mere fact that it plots buy and sell arrows seems to be the only justifiable factor for traders to use this indicator.
While there is scope for traders to develop some strategies, it is important to understand without any flexibility, the buy sell indicator could be just another redundant technical indicator that you could probably do without.
While some might argue that the buy sell indicator is great to trade in the trending markets, the truth is that when the markets are evolving in real time, it is difficult to know when the trend will continue or if the markets will turn sideways.
Under such circumstances, there is a high likelihood that you would end up losing money using the buy sell indicator rather than make money from it.
As with any technical indicator, trading signals should not be taken based on the signal given off by just one technical indicator. Therefore, traders need to focus on additional validation. If you do see some validation from other indicators, then the buy sell indicator works fairly well as a trend following indicator which shows you where you can place your stops.