3rd Generation Moving Average Indicator For MT4
The 3rd Generation Moving Average Indicator For MT4 is an advanced variant of the Simple Moving Average that has a decreasing temporal lag based on an increase in the time period for which the Moving Average is calculated.
Trading ideas with the 3rd Generation Moving Average Indicator For MT4
This indicator is based on the simple moving average indicator however it is slightly different because this combination of moving averages does not have strong lag components therefore it makes the prospective signals more reliable compared to using the normal simple moving average indicator.
3rd Generation Moving Average Indicator For MT4 - Trend Direction
Referring to the image below you can see that the red line is the faster moving average compared to the blue line.
This is beneficial to us for a number of reasons. The main reason being that it allows us to identify the trend direction quite easily because the direction is shown to us as indicated below.
In the image above you can see that I demarcated an uptrend and I have also drawn in a downtrend. So how you go about distinguishing the one from the other is simply by looking at the position of the red line compared to the blue line. So for an uptrend, when the red line is above the blue line then it means that the market is bullish.
Similarly but opposite for downtrends, when the red line is below the blue line then we are in a bearish market. This is a lot better because it mitigates the need for turning to complicated methods of trying to determine what the trend direction is.
3rd Generation Moving Average Indicator For MT4 - Reversals On Small And High Time Frames
Naturally traders will gravitate towards the crossover moments initiated by the indicator for small reversal trading opportunities. In the image below I have actually inserted a picture showing you what these respective reversal signals look like.
Just know that as pointed out in the image above that this is for trading reversals on the smaller timeframe. The smaller timeframe that I am using in this regard is a 5-minute time frame. So on the left-hand side, you see that we have a bullish reversal trading opportunity. This comes about when the red line is seen crossing the blue line to the upside which is an indication that there is a change in direction therefore you must open up a buy.
And then to the right-hand side, you can see a sell trading opportunity. I basically just need to wait for the red line to cross the blue line to the downside. So the moment that happens you open up a sell trade. When trading in this manner on the lower time frames you noticed that when the red line crosses the blue line the price action is not too far away from the red line itself, therefore, it makes our entry more rewarding in terms of minimal risk.
However on the higher time frame, this is not the case because when the red line crosses the blue line sometimes you find that the price action is trading too far away from the red line, therefore, it makes the prospective reversal trading opportunity less favorable in terms of risk to reward. However, this can easily be overcome by making a slight adjustment in terms of what you are looking for in the trade set up. In the image below you can see that I inserted a EURUSD chart from a higher time frame in this case it is a one-hour chart.
Making reference to the image above you can see that we have some trading opportunities in the form of reversals. So similar to the smaller timeframe sell-scenario we wait for the red line to cross the blue line to the downside if you want to initiate a sell trade. However, because it is a higher time frame we need to prioritize trade setups where the price action is retracing back towards the red line as circled in the sell trading opportunity.
The next example follows the same yet opposite sequence. So just like in the smaller timeframe example wait for the red line to cross the blue line to the upside if you want to initiate the buy trade. Just remember that because this is a higher time frame so we need to wait for those trades whereby the market retraces towards the red line as this will strengthen our case further when opening a buy position as a reversal trade.
3rd Generation Moving Average Indicator For MT4 - Conclusion
The 3rd Generation Moving Average Indicator is a well-refined tool if you know how to use it well. It is attributed to great capabilities that gracefully enables us to seamlessly detect trend direction. Furthermore, it also allows identifying highly probable reversal trades setups - both on the smaller and higher time frames. The trading opportunities in this regard followed the same theme however they differed with slight adjustments in terms of technical analysis.