Auto Trend Lines Indicator For MT5
The Auto Trend Lines Indicator For MT5 draws trend lines directly on the chart. This is a great helper for your technical analysis especially if your are a novice trader. The indicator even draws a trend channel which you can use to detect overbought and oversold conditions.
Trend lines are used by many professional traders. And as with most trading tools you can use them in many different ways to your advantage.
Luckily the Auto Trend Lines Indicator For MT5 makes the work for you and draws trend lines for you on the chart. It even draws a trend channel with which you can make your trading decisions.
I personally prefer trend reversal trades because with these types of trades you can enter a new trend very early. During the years I have researched that you can have high probability reversal trades when you wait until multiple edges occur at the same time and at the same price level.
If such a situation exist where multiple edges confirm a possible upcoming reversal then you will have on average a higher winning percentage and the winning trades will be bigger.
We will now start with the first edge and later add more edges to the setup.
Detecting trend channel overshoot with the Auto Trend Lines Indicator For MT5
As I mentioned above this indicator draws trend channels for you. And trend channel overshoots can be used as a high probability reversal signal. Trend channel overshoots occur if the price suddenly moves faster into the direction of the trend than it did before.
I will explain this concept now based on an upward trend channel example. As you can see in the following screenshot, the indicator has drawn an upward trend channel based on the recent price action of the upward trend.
The lower boundary of the upward trend channel is drawn with purple color while the upper boundary has blue color. If the price overshoots the blue line to the upside then the experienced trader knows that the upward trend is in an overbought condition. Overbought conditions are an early warning that the upward trend will soon run out of steam. We will most probably see a bigger correction (pullback) to the downside or even the start of a new downward trend.
As labeled in the screenshot above with the red arrow, once the price overshoots and upward trend channel to the upside you can then expect a trend reversal to the downside because the price is in an overbought condition.
So, how can you add additional confirmation that the reversal to the downside will occur at this trend channel overshoot?
Adding regular MACD divergences to filter the best setups
If you have some trading experience then you will probably have heard of divergences. The MACD is a great indicator to detect reliable divergences. A regular bearish divergence occurs if the price makes a higher high while the MACD indicator makes a lower high.
If you wait for a situation where an upward trend channel overshoot and a regular bearish divergence exist at the same time then you have a setup with an even higher probability for a downward reversal. The following screenshot shows this situation:
If you always wait for such situations where multiple edges come together then you will have less pain during your trading career because of the higher winning percentage. You will also develop a much better confidence as a trader.
But this is not all. You can filter even better signals which produce an even higher winning percentage in the long run.
So, how to get an even better edge over the market?
Adding resistance levels to filter even better setups
As explained above, you can wait until 2 edges occur at the same time to get a higher winning percentage. But you can even go further and wait until 3 edges occur at the same time.
The Auto Trend Lines Indicator For MT5 has drawn an upward trend channel and the price made an overshoot to the upside. A bearish divergence occurred during the overshoot. Now you can check the chart if the price is at an resistance price level at the same time. If you are a very picky trader, and many professional traders are very picky (they sometimes wait days or even weeks until the conditions for a trade are perfect), then you will have an even higher winning percentage in the long run.
In our example exactly these conditions would be fulfilled if the price makes an overshoot of the upward price channel. I have labeled this situation in the following screenshot:
Auto Trend Lines Indicator For MT5 - Conclusion
Every trading indicator is only as good as the trader who uses it. The experienced trader knows that successful trading is more than blindly following a mechanical rule set. If that would be true then we could all develop profitable expert advisors who are running successful without any human intervention. But this is not the reality.
To get successful as a trader you need to develop a skill set to combine your trading knowledge with what you see on the charts. You need to learn during which market condition which trading knowledge gives you an edge over the market. I have shown you one possible way by adding more and more edges to a setup. This adding of edges is a filtering mechanism that produces less trades. But those trades will be of higher quality.