Variation Index Indicator For MT4
Table Of Contents:
- Variation Index Indicator For MT4
- Parameters of the Variation Index Indicator For MT4
- Some of the Advantages of Using the Variation Index Indicator For MT4
- Some of the Disadvantages and Limitations of using the Variation Index Indicator For MT4
The Variation Index Indicator For MT4 is an indicator that measures the difference in length between the individual price bars and plots this difference using a signal line on the trader's chart. The higher the similarity in length between the candlesticks, the higher the signal line of the Variation Index Indicator For MT4 goes and when there is a lot of difference, the indicator's signal line falls sharply.
Partially Automated Trading Besides Your Day Job
Alerts In Real-Time When Divergences Occur
Parameters of the Variation Index Indicator For MT4
n: This parameter can be used by the trader to control the level of sensitivity of the Variation Index Indicator For MT4 to the price.
nBars: This parameter can help the trader to determine how many bars in history the Variation Index Indicator For MT4 should print its signal line for. This is useful for backtesting the indicator.
Some of the Advantages of Using the Variation Index Indicator For MT4
One important advantage of using the Variation Index Indicator For MT4 is that it can tell the trader when there is a change in the momentum of the price on the trader's current chart.
This means that if a trader attaches the indicator to any currency pair or trading asset charts, it would become visually easier for the trader to be able to identify the periods when the price volatility or speed starts to increase and when it starts to reduce.
This is important because a lot of trading strategies used by traders depend on increased momentum in the price in order to make the trader some profits. Also, there are other strategies that require periods of very low volatility in the market. A trader has to be able to tell when each of these periods is present on his charts and the Variation Index Indicator For MT4 can help him achieve that.
Another advantage of using the Variation Index Indicator For MT4 is that it can help the trader to spot directional volatility. This means that the trader would be able to identify the direction that the market is actively expanding towards after a period of low volatility has happened in the market.
This is possible since, during the period of very little volatility and market liquidity, the signal line of the Variation Index Indicator For MT4 stays towards the top of its subwindow.
One there is an increase in the market volatility and the price starts to print increasing bars, the indicator's signal line falls immediately to the bottom of its subwindow. The trader can check the direction that the price is moving to when the sharp fall happens and then look for trading setups in this direction.
A trader who watches and trades multiple timeframes of the same currency pair or trading asset can also use this technique on a higher timeframe of the same currency pair in order to gain a directional bias which he or she can then use as the trade direction for the lower timeframes of the same currency pair.
Another important advantage of using the Variation Index Indicator For MT4 is that it can help the trader to spot periods in the market with a high probability that the trend will reverse during the active trading sessions.
This means that the trader who uses the Variation Index Indicator For MT4 can watch for when the signal line of the Variation Index Indicator For MT4 climbs to the top of its subwindow followed by a sharp drop at the end of a retracement or a trend as this can indicate to the trader that the trend or the retracement may have ended and that a new direction might be starting.
The Variation Index Indicator For MT4is also an excellent add-on to any other trading system especially one that already has a directional bias since it can help the trader to then identify when the trend has ended and when there is a momentum increase in the new direction.
If the trader watches the movements of the Variation Index Indicator For MT4's signal line in correlation with the directional indicator like a Moving Average crossover, he or she would be able to precisely pinpoint when a new trend has started on his or her particular timeframe. This will greatly increase the trader's accuracy in spotting precise entries.
Another advantage of using the Variation Index Indicator For MT4 is that it can help the trader to avoid looking at the trading charts all the time during the trading day. This is because the trader can tell from a single glance at his or her charts with the indicator attached, whether or not a market has enough momentum for him or her to make a trade.
Some of the Disadvantages and Limitations of using the Variation Index Indicator For MT4
A disadvantage of using the Variation Index Indicator For MT4 is that it tends to be too sensitive to the price at certain periods in the market and as a result can react in such a way that indicates to the trader that a trend change is about to occur when the price is merely retracing on the trader's current timeframe.
Because of this, the trader using the Variation Index Indicator For MT4 is often prone to a lot of false signals when using the indicator and must employ a strict money management strategy in order to ensure that he or she does not take too much risk on any individual trade.
An ideal part of the trader's money management strategy should entail that the trader's positions never take more than 1% - 2% of the trader's entire equity since big losses are more difficult to recover from.
Another important disadvantage of using the Variation Index Indicator For MT4 is that it does not work very accurately on the lower timeframes of the market, giving the trader a lot of false moves due to the high level of market noise on these timeframes of the market.
Traders who must use the Variation Index Indicator For MT4 would achieve more accurate trading results using the indicator if they always use the indicator on the higher timeframes of the market.
