Absolute Strength Averages Indicator For MT5
The Absolute Strength Averages Indicator For MT5 is similar to the more commonly used Relative Strength Indicator, Stochastic Oscillator, and the Directional Movement Index indicators. The calculation that this indicator uses is very similar to find the strength of both buyers and sellers in a market. It is shown in a dedicated window, meaning that it is not an overlay on price. It gives the calculation and points, not percentage when it comes to buyer or seller strength.
The indicator can be used on a multitude of time frames and seems to have just as much efficacy on the five minute chart as it does the daily chart. Obviously though, longer time frames to offer longer-term trading opportunities that can collect more pips, but the frequency itself won’t change whether or not the market can be traded using the signals that this indicator fires off.
Using the Absolute Strength Averages Indicator For MT5
Using the Absolute Strength Averages Indicator For MT5 takes a bit of getting used to, because it features for different lines in its dedicated window. There are two thick lines and two dashed lines, with two of them representing bullish power, and two of them representing bearish power.
Looking at the lines on the indicator, there is the two thick lines that represent the power of either buyers or sellers. The green line shows the power of buyers while the orange colored line represents sellers. The dashed lines represent when markets may have gotten a bit over bought or oversold. Unlike many other indicators, it isn’t directional in the sense that you may believe.
In the dedicated window where the Absolute Strength Averages Indicator For MT5, as a line crosses another and starts to go higher, that shows that the traders represented by that color are gaining strength. In other words, just because a line is going higher doesn’t necessarily mean that it is a buying opportunity. For example, in the chart below you can see that the New Zealand dollar had more sellers gaining strength then buyers as the orange line crossed above the green line as markets fell apart. You can see that as the market loss momentum to the downside, the same orange line started to slow down, and even crossed the dashed line just below it, showing that perhaps we were running out of momentum and as you can see that did in fact turn out to be the case. As an exit signal, some traders will simply wait for the lines to cross again, as they did in fact do so after a bit of consolidation with the orange level crossing over the green line yet again.
Obviously, it also fires off buying signals as well. The Absolute Strength Averages Indicator For MT5 will show a green line breaking above the orange line and spreading out further and higher as more strength enters the marketplace from the bullish side. As you can see on the chart below, the Euro started to gain strength against the Japanese yen after falling, and as the indicator started to break to the upside with the green line, it showed that buyers were starting to take over again. At this point, there are a couple of ways this trade could have been managed, as the momentum started to pull back slightly. You can see that the thick green line crossed below the dashed line, and then bounced back above it. At this point, the market started to pull back slightly, but then picked up momentum again. That being the case, it comes down to what the trader feels comfortable with doing, as you can see, the market went much higher before the green line actually crossed the orange line, meaning that about half of the trade still had yet to play out. That is one of the things about using this indicator, is extraordinarily flexible as to how you read and use this information.
A few thoughts on the Absolute Strength Averages Indicator For MT5
While the indicator is relatively simple to read as whether or not the market is becoming more bullish or bearish, the catch would be with the nuances that you choose to use in filtering out trades, and perhaps even more importantly, managing them. This is a great indicator to use in congruence with the overall longer-term trend, but it is also a great way to look at the market from an intraday standpoint, giving you the opportunity to either get out before the trend starts to fall off, or perhaps even more enticingly, add to an already existing position.
For example, one of the biggest strengths of the Absolute Strength Averages Indicator For MT5 is that it can show a short-term pullback and then a continuation of strength, or of course vice versa. When used on a shorter-term timeframe, as momentum continues in the favor of the longer-term trend, it can suggest that it’s time to add to that core position, maximizing your position size and therefore your gains. One scenario could be going long in a currency pair, based upon the daily chart. After that, this indicator can be looked at from an intraday standpoint for pullbacks that then cross to the upside for bullish pressure to strengthen, meaning that you can add to your longer-term trade. By adding on the dips that show bullish momentum, you are moving with the overall market, and timing your entries going forward as well. This allows the trader to “pyramid” going forward. Beyond that, if the indicator does not confirm a continuation of momentum, then perhaps it keeps you from adding at a less than optimal level.
When looked at through the prism of different time frames, you can see that the Absolute Strength Averages Indicator For MT5 can be used in a multitude of different ways. Unlike many other indicators, it gives you the ability to play on momentum, and therefore in and of itself can be a bit of a trading system. Married with the longer-term trend and perhaps candlestick analysis, the Absolute Strength Averages Indicator For MT5 can be a great tool in your trading toolbox.