The Signal Bars Indicator For MT4
Indicators offer traders an easy to use tool that makes use of metrics to give an easy to interpret visual representation of what is happening to a trading pair. Though most indicators are lagging indicators, it is important to confirm signals using a strong trading system.
The Signal Bars Indicator For MT4 offers these capabilities to traders in that it shows the trader trends from the lower time frame (from one-minute to four-hour) without having to switch down to those time frames. If for example, you are on the five-minute time frame, the Signal Bars Indicator For MT4 will show the trends of the lower time frame being the one-minute time frame in this instance.
Benefiting Signal Bars Indicator For MT4
The major benefit of having such an indicator comes from a particular school of thought with regards to trading which follows a notion stipulating that it is less riskier to take a trade in the direction of the trend in the higher time frames. Meaning, that if you have identified a buy signal in a 15-minute chart then only take that buy signal if the trend on the one-hour time frame is an uptrend.
The opposite thereof is also true. Now the reason for doing so is that, by virtue of going one or two time frames higher, the momentum of the trend is stronger thus reducing the risk of the trade by taking trades in the direction of the higher time frame. If you were to do the opposite of this rule then it simply means you're going against the trend.
I delve further into this concept in the following examples, using the Signals Bars Indicators For MT4 indicator.
Yay Or Nay To the Signal?
It is not encouraged to over trade by taking every signal trading opportunity presented by the Signal Bars Indicator For MT4. However, it is good practice to use confirmation tools to block out the bad trade setups in order to only take trades with a high probability to be winning trades.
Now below I go about showing you an unfavorable trade setup given by the Signal Bars Indicator For MT4.
The Signals Bars Indicator For MT4 gives sell signals with the use of blue diamond icons and buy signals with the orange diamond icons. In the image above I give a clear illustration as to when it is not ideal to take certain signals. The signal that was brought into question here was the orange signal for a buy trade. This may all be good and well taking this signal due to the fact that the market is trending in an upward direction. However, the presence of bearish divergence deems this signal risky and unfavorable because price is making higher highs but the Relative Strength Index (RSI) oscillator is making lower highs; this is a classic visual description of bearish divergence formation.
Relative to the smart money cycle the bearish divergence structure reveals to me that the big banks have traded the market to a point known as euphoria for the counter traders who are in a net long position. This stage of euphoria tends to mark the possible high and end of an uptrend and downtrend. In this respective uptrend the stage of euphoria is created by the big banks to induce the herd (rest of the traders) into taking more buy orders which is a trap because the smart money can move price down (possibly) in the opposite direction thus making the long traders anxious.
Additionally, the buy signal in the above image came at a point where the AUDUSD trading pair has just formed a bearish engulfing candlestick pattern. There is a black bearish candlestick, in the circled area, that just about engulfs the preceding white bullish candlestick. The presence of the bearish engulfing candlestick pattern in the price structure of AUDUSD further drives home the point that this is not a favorable buy signal to take.
Therefore, with the confluence of these two important factors, bearish divergence and bearish engulfing pattern, it would not be ideal to take a buy signal based on the trading system I use. Hence why I always encourage traders to build a strong trading system that allows them to also exercise discipline in choosing which trades to take or not.
This Signal Looks Fruitful
Above you see an image I captured of the AUDUSD trading pair about to make a possible move. I have to stress the importance of not over trading and also being patient. There is no need to jump across every trading instrument just to look for trading opportunities. Analyzing one or three pairs over time will always present more than enough trading opportunities and as you progress in your trading you will begin to develop a feel for the trading pair/(-s).
So there is absolutely no need to go into a reckless trading mode when there are no evident trading opportunities. I waited patiently with this trading pair because the confluence of different factors made this pair compelling for me because I remained expectant of a possible reversal/dip which I could profit from. The Signal Bars Indicator For MT4 made this job easy for me because when it gave me a blue sell signal there was a formation of a bearish engulfing pattern. The bearish divergence pattern is formed during a context that is ideal for selling because buying has been consistently rejected for several days.
This is one way I would go about using the Signals Bars Indicator For MT4. I am sure that there are countless other ways of going about using the Signal Bars Indicator For MT4.
Stick To A Solid Trading System
The Signal Bars Indicator For MT4 shares no different thesis in this theme because ultimately it is also there to reinforce a strong understanding and system of how the market works. Patterns and behavior in the market are recurring but it takes a trained and/or experienced eye to rapidly recognize these patterns. The Signal Bars Indicator For MT4 offers many trading opportunities that need to be objectively analyzed to validate the risk of committing to the subsequent execution of trading orders (if any).
Please note that you should always use a demo account when you learn to use a new trading tool. This will help you to avoid financial losses during the learning curve which comes with every new trading tool. On a real money account we suggest a conservative money/risk management where you should not risk more than 1% of your trading capital for each trade.