MTF inside bar indicator
Trading with price action based pattern candlestick patterns is a good way to understand the sentiment behind the markets. Price action based candlestick patterns is a product of the Japanese candlestick charts.
Used since the ages, the candlestick charts are both visually appealing and also helps traders in understanding the sentiment of the markets. Many traders combine candlestick based patterns in their analysis.
This gives them the distinctive advantage of being able to combine both technical analyses as well as candlestick patterns to reduce the risk in the markets. Combining the methods also gives traders more confidence in the markets when they are trading.
Among the many different types of patterns that are available, the inside bar is one such pattern that is quite powerful.
What is the inside bar?
The name inside bar comes from the fact that one of the bars or candlesticks are formed inside the range of the previous session. In candlestick terminology, an inside bar is also known as a harami pattern. These are classified into the bullish harami or the bearish harami.
When you make use of the regular bar chart, for example, the name given to such a pattern is called the inside bar pattern. An inside bar pattern forms when the current session is engulfed or remains within the highs and the lows of the previous bar.
In terms of market sentiment, this means that trading has been subdued. The tight range that the markets maintain leads to a potential breakout in the near term. Inside bars are ideally formed just about everywhere.
But they gain a lot of significance if the inside bar is formed near a key price level such as the support or a resistance level. The general idea of trading the inside bar is to wait for the price to break out from the inside bar (i.e: the previous bar’s high or low). Traders then take a position in the direction of the inside bar’s breakout.
The term MTF stands for the multi-time frame which is a method where traders combine the analysis from a higher time frame and then look to a lower time frame to time their trades. This can seem a bit complicated at first, but it allows traders to trade with more confidence and also helps to reduce risk in the markets.
What is the MTF inside bar indicator?
In recent times, traders have experimented with the inside bar pattern, leading to the creation of the MTF inside bar indicator for MT4. This indicator basically allows traders to use the indicator to plot the inside bar from the higher time frame onto the lower time frame.
For example, if you see an inside bar on the daily chart forming, you can then switch to the four hours or the one hour chart time frame and trade accordingly. One might argue about the benefits of using such a method.
But because trading is quite unique from one trader to another, some might find this to be quite useful.
To use the MT4 inside bar indicator, download the indicator and then install it onto your MT4 trading terminal. Once the indicator is installed, restart your MT4 trading platform and drag/drop the indicator onto the chart of your choice.
You will be presented with the configuration window as seen below.
MTF Inside bar indicator Configuration
The configuration window is relatively simple. The below give more details about the configuration of the MTF inside bar indicator.
TFup: This section allows you to configure the higher time frame from which you want the inside bar indicator to plot the values. The default is set to 3. This means that if you use the H1 or H4 indicator, the MTF inside bar indicator will show three time frames higher. In other words, it would be monthly of the weekly time frame. You can set to this 2 or even 1 to show just two or just one time frames higher from the chart that you are using.
Bars back: This setting allows you to show the number of previous bars the indicator should calculate the inside bars for you. There is no need to change this to a higher setting as it could potentially clutter your charts.
Stats: The default is set to false. Setting this to true will show some statistics of the inside bars formed previously.
UpCandleColor/DownCandleColor: This setting allows you to configure the color of the inside bars being formed. Basically, you can use the colors to customize how the indicator should look when it plots the higher time frame’s candlestick pattern on the lower time frame chart.
Width: Using the width you can control the width of the lines that are drawn.
Filling: The filling configuration allows you to plot the boxes with filled color or not. This is purely a matter of personal choice and does not have any impact on the performance of the indicator.
Once you have entered your preferred customizations, the MTF inside bar indicator plots the details as below.
MTF Inside bar indicator on MT4
As the picture above shows, you can see that the MT4 inside bar indicator plots the daily time frame’s price action on the lower time frame charts. This doesn’t quite give you any major edge in the markets.
However, beginners will find the MTF indicator to be of some use as it allows them to see how the price action unfolds on the lower time frame chart based on what is happening on the larger time frame.
Based on the candlestick patterns that the MTF inside bar indicator forms, traders can trade based off price action methods by looking at the patterns on both the daily chart time frame and the lower chart time frame which they are using for trading.
You can combine the MTF inside bar indicator with any existing trading system. The tool simply gives an easy approach to traders who want to get started with multi-time frame trading and price action trading approaches.