Forecast Indicator For MT5
Table Of Contents:
- Forecast Indicator For MT5
- How is Forecast Indicator For MT5 Calculated?
- How to Interpret Forecast Indicator For MT5
- How to Trade Using Forecast Indicator For MT5
The Forecast Indicator For MT5 plots the percentage difference between an underlying asset’s closing price and the t-period linear regression forecasted price. The indicator was developed by Tushar Chande.
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Alerts In Real-Time When Divergences Occur
How is Forecast Indicator For MT5 Calculated?
The Forecast Indicator For MT5 is an extension of the linear regression based indicators that were made popular by Tushar Chande in the 1990s. As has been stated above, the indicator charts the deviation between the current closing price and a t-period linear regression forecast of that close. The deviation is expressed as a percentage of the close; the formula for which is stated below -
Close - Forecast
%F = ---------------- * 100
Close
Where,
Forecast = Linear Regression of prior T periods
The t-period prices for the linear regression start from the previous period’s close, and the forecast value is the line extended out to current time frame under consideration.
How to Interpret Forecast Indicator For MT5
If the Forecast Indicator For MT5 remains above the zero line, it indicates the forecast price is higher than the actual price. Contrarily, the indicator less than zero signify the forecast price is lower than the actual price. In rare instances when the forecast price and the actual price are the same, the indicator is equal to zero.
When the Forecast Indicator For MT5 hovers above the zero line for an extended period, it signals that price is likely to rise in the future. Conversely, if the indicator stays below the zero line for a sustained period, it points to potentially lower price levels. Short-term traders are advised to use shorter time periods for the indicator and perhaps less stringent standards for the required length of time above or below the forecasted price. Longer time frame investors should use larger time periods and perhaps more rigorous rules for the required length of time above or below the forecast price.
Tushar Chande also recommended the plotting of a moving average trigger line on the Forecast Indicator For MT5 to generate early trend change warnings. When the indicator crosses above this trigger line, higher prices are suggested. When the Forecast Indicator crosses below the trigger line, lower prices are projected.
How to Trade Using Forecast Indicator For MT5
Combining simple price action analysis with the Forecast Indicator For MT5 can lead to profitable outcomes. On a higher time frame chart, say 1 hour, we wait for price to close above the last major price peak. This signifies that the short term trend is up, and our bias is for long trades. We then wait for the Forecast Indicator For MT5 to cross the zero line from below on the 5 minute time frame. Contrarily, if on the hourly chart, price drops below the last major price trough, the short term trend is down, and our bias should be for short trades. We can initiate sell trades as soon as the Forecast Indicator For MT5 tumbles below the zero line. This simple strategy has the twin advantages of not only being multiple time frame, but also trend following. As long as we flow with the broader market direction, the odds of our trades succeeding will remain relatively high.
