While conducting research for my website I came across a source of indicators for the MT4 platform. This one source offers over a thousand different indicators you can download for free and use on the Meta Trader 4 trading platform. I was originally looking to track down some information on Forex trading schools and Forex option trading…which I found…and in the process came across this goldmine of chart indicators. You can access all of these – for free – by visiting our site. Using the two indicators we discuss here you can develop your Forex custom trading software. It’s not exactly auto Forex trading, because it requires some regular attention from the trader, albeit just a small amount of time, but this is not a set-and-forget Forex trading system. I trade this on the daily -D1- time frame and spend less than five minutes a day updating my trades.
The first indicator is called the Non-Lagging Adaptive Moving Average. An Adaptive Moving Average, or AMA, differs from other types of moving averages in that the AMA changes its sensitivity to price fluctuations. The Adaptive Moving Average becomes more sensitive during periods when the price is moving up or down significantly – that is to say when price is trending…and it is less sensitive when price is choppy. This means it’s an excellent tool for identifying trends. You will find that the line produced by the AMA is ‘smoothed’ compared to that produced by an exponential moving average (EMA) until a strong trend develops. At this point the AMA overtakes the EMA in moving in the direction of the trend.
Now the great feature about the AMA that we offer through our site is that it can change color as the trends change…up or down. This capability makes it almost idiot-proof and enables the trader to very easily identify a trend. The default settings are red for down and blue for up. I prefer green for up just because that’s how I set up my charts. You will also see short periods of yellow when markets are flat or trading within a range. These often disappear later on when price movement is re-assessed. What we end up with is a line the turns green when the market is trending up and red when the market is trending down. Quite simple, isn’t it?
I then combined this Non-Lagging AMA with another indicator called the Beginners Alert. This alert is a series of dots. Again, default is blue and red that I changed to green and red. This one also has an optional audio alert that can sound through your computer speakers when a dot appears. You can also change the size of the dots if the smaller ones are hard to see – although I’ve noticed this change does not save when you close the chart screen – even if you have saved the settings in a chart template.
How it works is when prices make a peak and recede a green dot appears. Conversely, when price hits a bottom and reverses a red dot appears. The way I trade this combination is by looking first to the color of the line. If it’s green, I then look for a red dot nearby. If both these conditions are met then it tells me two things: the market is trending up; and it’s made a bottom and is reversing. This is when I enter long. I stay long until the next red dot appears. On the other hand, if the line is red I know the market is trending down. I look for a nearby green dot indicating a peak in prices. This is when I enter short…and stay in until the next green dot appears. Remember to trade in the direction of the overall trend. If the longer term trend is down, I do not take long trades as they tend to be brief and weak. We offer an exhaustive discussion of how these two indicators work in concert and how to trade this system on our website under Tools and Indicators/Indicators for the MT4. We also show you WHERE to obtain these two indicators absolutely free of charge.