Normalized Price Indicator Indicator For MT4
The Normalized Price Indicator Indicator For MT4 can be used to see the normalized price of any asset. This indicator can also be employed to detect bullish and bearish divergences in a market.
Trading ideas with the Normalized Price Indicator Indicator For MT4
As highlighted in the initial texts, this tool can be used for you to identify various divergent trade setups as they occur in the market. Divergence trading is tricky but once you grasp the concept you will grow in confidence in terms of your ability to comfortably trade these patterns.
Regular bullish divergence occurs when the market is making lower lows but the oscillator at the bottom of your chart is making higher highs therefore you will look for entry points into the market to execute buy orders. Whereas, bearish regular divergence occurs when the market is making higher highs but the indicator in the indicator window is oscillating in such a way that it is making lower lows therefore you will look exclusively for selling opportunities.
That is the basic essence of regular divergence trading. Let us look at another buy example and possibly a sell example which corresponds with the statements made above.
Normalized Price Indicator Indicator For MT4 - Buy Entries
Buy entires become available as soon as we see that the market is painting a bullish divergent trade setup on our trading charts.
Looking at the figure above you can see a clear example of a proper bullish regular divergence setup. The price is making lower lows whilst the oscillator is making higher highs. This is a classic example of the loss of selling momentum in the market. Therefore, the market sentiment is about to change to accommodate buyers.
Given the nature of this signal and its reliability - you can stand to yield great results when the market moves in your favor. You could look for an edge in the market to improve your results or profitability with all your trades. One way of doing so is to prioritize those bullish regular divergence patterns which only occur in oversold regions.
For this purpose, I shall add an oscillator like a relative strength index. I will leave it in its default state with the oversold and overbought levels set at 30 and 70 respectively. So in this case the RSI must be at least touching the 30-level or be below it when a regular bullish pattern completely forms.
The figure below is an excellent illustration of what I am talking about.
This added-edge stacks the odds firmly in your favor thus presenting a close to ideal situation for you to go long upon the formation of a bullish divergent pattern. It is an added measure you can take if you want to be conservative in your trading.
However, if you are one of those aggressive traders then you can trade without the need of requiring the market to meet the oversold and overbought pre-requisites. You can simply just trade the divergent patterns as they form. There is nothing wrong with that at all.
Normalized Price Indicator Indicator For MT4 - Sell Entries
In the image above we have identified a selling opportunity in the form of a regular bearish divergence pattern. This is a big pattern because the length of it is pretty long. But if you look at the steepness of the higher high line you can see that the market was just consolidating around a resistance zone.
Looking at the next image below we can see that the market is in an overbought region at the time the market has printed a bearish divergent pattern.
The RSI is showing that the oscillator is above the 70-level which meets the sub-requirement of one of the rules we use for going short on this trade. As mentioned earlier that this is not compulsory - however, it does give us an edge in our divergent trading activity wherever these rules come into confluence.
If you can deploy these rules in your divergent trading I am certain that you will yield improved and consistent results in your divergent trading provided you stick to the trading rules without trading recklessly. Patience is the key for this system. If you are going to use the oversold and overbought rules then stick to it all the time because you do not want to have mixed results. Stick to one system throughout.
Normalized Price Indicator Indicator For MT4 - Conclusion
The Normalized Price indicator is one of the finest trading indicators to use especially when you commit its use to trade divergent trading signals. The examples referenced were for trading regular divergence trade setups. Both bearish and bullish regular divergence trading opportunities were revealed to you.
This gave you a great perspective on the possibilities of this trading tool based on practical illustrations. Furthermore, we incorporated an oscillator in the form of an RSI. The 70 and 30 levels were used as overbought and oversold levels. These levels were used as an edge or sub-requirement for trading highly probable regular divergent trade signals.