Average Size Bar Indicator For MT4
Table Of Contents:
- Average Size Bar Indicator For MT4
- Parameters of the Average Size Bar Indicator For MT4
- The Average Size Bar Indicator For MT4 as a Tool for Measuring Volatility
- The Average Size Bar Indicator For MT4 as a Tool to identify Divergence
- Using the Average Size Bar Indicator For MT4 as a contrarian Tool
- Risk management using the Average Size Bar Indicator For MT4
The Average Size Bar Indicator For MT4 is an indicator that was built primarily to help the trader to measure the average bar size across a certain number of price bars at each point in the market. The Average Size Bar Indicator For MT4 is built based on the price and a Moving Average indicator.
Partially Automated Trading Besides Your Day Job
Alerts In Real-Time When Divergences Occur
Parameters of the Average Size Bar Indicator For MT4
MA_Period: The MA_Period parameter can be used by the trader to adjust how sensitive the Moving Average indicator is to the price.
MA_Shift: The MA_Shift parameter can be used to either shift the Moving Average indicator forward or backward in the price.
MA_Method: The MA_Method parameter can be used to adjust how the Moving Average calculates its signals. The signals could be calculated based on the Open, the Close, the High, the Low and several other methods involving the price bar.
The Average Size Bar Indicator For MT4 as a Tool for Measuring Volatility
The Average Size Bar Indicator For MT4 can easily be used by the trader to spot when there is an increase or a decrease in the volatility of the price in any timeframe of the trader's currency pairs.
From the example above, notice how the signal line of the Average Size Bar Indicator For MT4 tends to move up whenever there is a strong price move on the chart. Traders can use this to identify the start of new trends on their trading charts.
The Average Size Bar Indicator For MT4 measures the volatility on a chart by measuring the average movement across a recent number of closed candles or bars on the trader's charts.
The indicator then plots this derived value in the form of a Moving Average on the trader's chart to enable the trader to visually identify when there is an increase or decrease in the price momentum.
This can be very useful to the trader especially if his or her strategy is a trend-following strategy that entails that the market has to be trending in order for the trader to make some profits.
Even traders who look to trade the periods of low volatility in the market like Mean Reversion traders could also use the indicator to identify and avoid high volatility periods in the market.
A trend-following trader can also use the volatility information derived from the Average Size Bar Indicator For MT4 for exiting trades. If the trader is already in a profitable trade, he or she can watch for when the volatility drops just before the change in direction and exit his or her positions at this time.
The Average Size Bar Indicator For MT4 as a Tool to identify Divergence
A close look at the way the signal lines of the Average Size Bar Indicator For MT4 have formed shows that it moves in accordance with the price on the chart.
From the picture above, the indicator's signal line prints a new top whenever there is a swing high in the price and a low whenever there is a swing low.
These swing highs and swing lows usually corresponding with the price printing higher highs and higher lows as the price moves higher in an uptrend and lower lows as the price moves lower and lower in a downtrend.
The only exception to this correlated price movement by the indicator is when the price is in overbought or oversold territory and about to reverse.
As observed from the image above, when an uptrend is about to reverse, the Average Size Bar Indicator For MT4 of the indicator starts to print lower highs contrary to the price which is still making higher highs on that trading chart.
Also, in a downtrend, the indicator's signal line begins to make higher lows even as the price keeps swinging lower.
This is a high probability reversal signal to the trader that the price may reverse on his or her current timeframe. The trader can then enter buys or sells in the new direction of the market once the price reverses.
Using the Average Size Bar Indicator For MT4 as a contrarian Tool
The Average Size Bar Indicator For MT4 can also be used by the trader to detect periods in his or her charts when the big banks want to trap retail traders and reverse the price massively.
These kinds of price movements are typically comprised of long periods of very tight ranges where the price does not make any strong highs or lows. These price ranges can continue for several hours.
At the end of these price ranges, the price then makes a sharp false move in an initial direction. This sharp move is meant to lure in rookie traders who think the market would be moving in that direction and jump in immediately. Their trades, however, provide liquidity for the big banks to move the price well enough in the opposite direction.
The market doesn't move far and reverses to a new direction going back to the range and to the other side of the range. This is the point where the trader should be thinking of entering a trade in this new direction.
A trade setup in this new direction has a very high probability of working out because the retail traders that are trapped soon realize this and begin to close their trading positions in fear. This adds further momentum to the trend in the new direction.
A trader can learn to use the Average Size Bar Indicator For MT4 to spot when these price patterns set up on his or her charts as they can help him or her to gain a very good edge over the market.
Risk management using the Average Size Bar Indicator For MT4
The trader using the Average Size Bar Indicator For MT4 has to be very conscious of the risks involved with using the indicator as some of the time, it produces a lot of false signals.
In order to handle this properly, the trader must ensure that he or she never risk above a certain amount on any individual trades when using the Average Size Bar Indicator For MT4.
