Candle Strength Indicator For MT4
Table Of Contents:
- Candle Strength Indicator For MT4
- Trading ideas with the Candle Strength Indicator For MT4
- Candle Strength Indicator For MT4 - Buy Entries Using a Unique Scalping Method
- Candle Strength Indicator For MT4 - More Trading Examples
The Candle Strength Indicator For MT4 plots the difference between closing price and opening price of a candle in pips. It is a handy tool to graphically analyze the strength of bulls and bears.
Trading ideas with the Candle Strength Indicator For MT4
The candle indicator visually depicts the buying and selling activity in the form of bars. These bars are net-delta changes of the closing and opening price.
With this indicator, we are able to quickly check what is the dominant force in a period of time relative to the market activity during the complete formation of a candle. All bullish candles are plotted above the zero line and the bearish candles are plotted facing down below the zero line. This clear distinction makes a huge difference.
The default color of the candle strength indicator is blue as shown below:
In trading, you come across bullish engulfing patterns or bearish engulfing patterns. These candles patterns hint at potential reversals that are most likely to occur in the market. These reversals do not always occur but they happen often especially if these patterns are found in respective oversold and overbought areas in the market.
Candle Strength Indicator For MT4 - Buy Entries Using a Unique Scalping Method
We can look for buying opportunities using the candle strength indicator in the picture. A bullish engulfing pattern is formed when the body of the bearish candle is completely engulfed or overshadowed by the next bullish candle which follows.
Additionally, when these patterns form in zones considered as support and oversold, it gives us a great edge in the market because it affirms the reversal to the upside therefore it would be a good time to open buy positions when such instances occur.
However, there is a twist to this strategy. In this system, we will not be referring to the candles of the price action. We will be referring to the candle strength indicator. This might seem confusing at first - but just bear with me as you will soon begin to comprehend what I mean.
Just note that this strategy is meant just for scalping you should not marry this trade. Just take your profit as quickly as possible. I will show you a few screenshots. In fact, the previous screenshot actually has a few of these trading opportunities on your screen. Let us just take a closer look below.
The image shows you two bars in the histogram labeled as one and two. These bars in the histogram - we can treat them as candles. therefore, with this viewpoint, we can deem the candlestick formation as formed by candles one and two as bullish engulfing patterns.
This fits the general rules of engulfing candle patterns. In the picture, you can definitely see that candle two completely engulfs the candle one. Therefore we can open a buy trade. However, you must refer to the low of candlestick one that corresponds to the actual candlestick in your price action. This is done so that you can set your stop loss.
As you can see that the stop loss and the take profit share a similarity in terms of the distance in which they are from your entry position. This will give you a risk-to-reward ratio of one-is-to-one. Which fits the scalping narrative perfectly well because we are not looking to over trade this opportunity as this is not a normal bullish engulfing pattern. Nevertheless, let us go about looking for more examples so that you can cement your understanding of this trading method based on the Candle Strenght Indicator.
Candle Strength Indicator For MT4 - More Trading Examples<
In the image above we see two more trading opportunities based on our strategy. Of course, there are more on the screen but highlighting these two only will suffice for illustrative purposes.
The first example labeled one, has a bullish engulfing pattern shown in the histogram. You see I have highlighted your entry points and the respective stop loss and take profit targets to give you equal risk and equal reward. I mentioned earlier that this is not a trading strategy that we should use for big trades because it would be a risky endeavor. Look at how the market met resistance near our take profit target for example one.
It flipped the wicks to the upside as it approached the take profit target and then it turned away to continue trading in the opposite direction. This does happen, therefore, protect your profits - sometimes you do not have to wait for the market to actually hit your take profit target. Just take profits when you are happy.
In example two we see a bearish engulfing example. This trade turned out to be a big trade but remember you will not have this knowledge of how the trade will actually turn out therefore you should just be happy with small profits or move your stop loss to break-even point the moment the market passes your take profit level. This will give you the chance to maximize your gains when the market moves drastically in your favor.