MAcrosses Indicator For MT4
The MAcrosses Indicator For MT4 is a Moving Average (MA) based indicator, whose value rises to 100%, if every short term MA is above the higher time frame MAs. Conversely, when every short term MA is below the higher time frame MAs, the indicator value drops to 0%. The MAcrosses Indicator For MT4 can be used as a momentum oscillator. Values above 90% can be deemed to represent overbought levels, while indicator readings below 10% suggest prices are oversold.
Trading ideas with the MAcrosses Indicator For MT4
When it comes to financial trading - moving averages tend to be amongst the most popular tools that are utilized. This is for good reason - it is actually not just average or beginner traders who use these moving averages - smart money traders also use them. Moving averages play a pivotal role in technical analysis. They are applicable across all time frames and all types of financial markets. Moving averages basically show you the directional bias of an asset. If the price action is mostly active above the moving average then it indicates that the directional bias is generally bullish. If the market is trading mostly below the moving average then it means that the directional bias is generally bearish. The further away the price action is from a moving average the stronger the underlying trend is relative to the momentum of the asset. However, they can also be used to analyze the transitional periods in the markets when assets change from bullish to bearish or the other way around. Of course, there are plenty of ways of achieving this but one popular way is to have multiple MAs with higher and lower periods and then trade the crosses. That is what the essential thesis is behind this indicator as shown in the image below.
The yellow MAs is the lower MAs and the red MAs is the higher MAs. The yellow color is a bit too light for the background but I shall change in a bit to a different color - perhaps green so that we can see it properly when analyzing the markets.
MAcrosses Indicator For MT4 - Oversold and overbought lines.
Prior to us jumping into trading examples - I just need to orient you around the workings of the indicator so that you can better comprehend its functionality and applicability. At least that is what I hope to achieve. In the image below you can see I have circled two main areas on the left and right-hand side of the screen.
By the way, the 82 and 18 levels is not a default setting - I added them in myself. You can add in your own upper and lower limit lines like 85 and 15. This will help you to identify possibilities when the market sentiment is about to change over. It was pointed out to you in the introduction that when we have both sets of lines touching the 100 upper-limit then it simply means that all the lower MAs are above the higher MAs. Then when all the lines are below, like right at the bottom level against the zero lower limit line, then it means that all the lower MAs are below the higher MAs. It goes another step further than this because ultimately this could imply that the market is either overbought or oversold. But for obvious reasons, this argument is not a strong basis for you to trade off these oversold and overbought levels because during trending conditions the MAs will be up or down against the 100 and 0 levels of the indicator but this is why I have incorporated the 82 and 18 levels into the frame.
MAcrosses Indicator For MT4 - Sell Entry
Now we are going to take a look at trading examples so that we can use the indicator to our benefit. For this purpose, I have actually added a Bollinger bands indicator into the mix so that we can better identify our trigger points as shown in the image below.
In the image above we are presented with an opportunity to sell. How we identify this trading signal is by waiting for the green line to go below the 82 line whenever the red and the green line have been hitting the 100 level limit during a strong uptrend. But we still need added-confirmation because we do not have enough supporting elements to motivate our sell. This is where the Bollinger bands indicator comes into play. Because we do not know 100 percent that the red and green lines are indicating to us that the market is in an overbought zone - it is best for us to simply wait for the price action to sell-off from the upper Bollinger band to the lower Bollinger band. When we have the price action touching the lower band then it means we can sell. Provided of course that the green line is below the 82 level.
MAcrosses Indicator For MT4 - Buy Entry
The sell example paved the way to unlocking the general operational principle on how to implement this basic strategy with the use of the MAcrosses indicator and a Bollinger bands indicator. Right now we shall look at executing a buy trade using the same technique as per the screenshot below.
In the image above, we can see that the market started rallying up from a zone considered as oversold. Remember that an oversold region is identified by the convergence of the green and red line at the zero level. When the price action rallies up and hits the upper Bollinger band then we can initiate a buy trade only if the green line has crossed the 18 level going up. With these main two elements coming into confluence we can buy.
MAcrosses Indicator For MT4 - Conclusion
Trading should not be difficult - especially when we have good tools at our aid such as indicators. The MAcrosses indicator is no exception. It has proven to be a useful tool especially when it comes to quickly deducing the directional bias in the market. Furthermore, we went to the extent of identifying possible oversold and overbought regions in the price action but with the help of the Bollinger bands indicator, we were also able to identify the most likely exit points that would lead to termination of the respective oversold or overbought periods.