Candle Meter MA indicator - share Bulls and Bears by stalls
Good afternoon, dear forex traders!
Why are prices rising or falling? Due to the imbalance of purchases and sales in the market. But what if we calculate in percentage terms: how many bulls we had, and how many bears on each individual candle? This non-standard approach was implemented by the indicator developers. Candle Meter MA, which helps to see the strength of the market and the changes in the preponderance of the balance in the direction of buyers or sellers. Today we will analyze how this indicator can be applied on Forex.
Platform: Metatrader 4
Currency pairs: any
Trading Time: Any
Recommended brokers: Alpari, InstaForex, Amarkets
Forex can be called a decentralized market: the volume of purchases and sales of currencies is distributed among institutional clients, transactions do not take place in single centers, as in the case of other commodity and financial assets. The objective disadvantage of such a bidding arrangement is the lack of clearly separated volumes of Buyers and Sellers.
The standard set of indicators of the Metatrader 4 platform and other similar terminals, instead of volume figures, indicates the total number of ticks (deals), or assigns them to the side of the “bulls” or “bears”, subjectively guided only by the color and direction of closing the candle.
This is a misinterpretation, which is proved by traders using the VSA theory in trading, which predicts market trends based on intraday turnovers. To predict the movement, they have to combine the final numbers of tick volumes that have passed during the formation of the candle with its graphical analysis - the size of the “body”, tails, etc.
VSA is a popular theory: it is real demand and supply that drives price. But the element of graphical analysis reduces the accuracy of forecasts, as does the relative size of the histogram of volumes, which in theory can be “infinite” in an active market, increasing dramatically when large players enter or exit.
Candle Meter MA solves all these problems by dismantling the candle and breaking ticks into volumes of bulls and bears in percentage terms. This makes it an ideal oscillator, a histogram, and a peculiar adaptive moving average, based on the results of an intraday turnover on each individual timeframe.
What is the indicator feature?
Indicator Candle Meter MA counts the number of ticks - bull and bear trades - inside the current candle, and then displays them in four ways at the same time:
- The percentage of purchases and sales displayed in the upper right corner of the graph, there is also an indicator showing the time until the end of the formation of the figure:
- The numbers (in percent) on the graph history, lower and higher near each timeframe:
- Two moving averages (red bearish and blue bullish):
- Histograms built on ticks for only one type of candle: blue bars for bullish closing, red bars for bearish closing.
The size of the bars indicates the relative strength of the volumes of buyers or sellers, estimated based on the percentage of their ticks.
Installation and configuration of the indicator
Indicator distribution Candle Meter MA contains one file with the ex4 extension, which should be transferred to the Indicators folder using the “Data Catalog” option in the Metatrader 4 platform. More detailed and universal instructions for installing any indicator are described in the article “How to install the indicator in Metatrader 4”.
On first start Candle Meter MA from the “Navigator” window or the “Custom Indicators” menu option, a trader will open a window with several tabs:
The main settings that affect the direct operation of the indicator are located in the “Input Parameters” tab (see screen above):
- Fast - determines the period of the fast moving average;
- Slow - the value of the period of the slow moving average;
- Display only Values above x - threshold filter for displayed volumes, defaults to 0 (zero). The indicator will exclude all data from the chart of percentage volumes of bulls and bears below the value indicated by the trader in this column;
- Max bar - the number of candles in the history on which indicator data are displayed;
- Notification - setting the frequency of updating data in seconds and ticks + the ability to receive alerts;
- Colors - color settings of the indicator.
Signals and methods of using the Candle Meter MA indicator
The presence of moving averages in the indicator implies the use of signals Candle Meter MA for trend recognition:
- Ascending - crossing from bottom to top by a fast (dash-dotted) line of a continuous slow moving Candle Meter;
- Descending - the intersection of the fast moving Candle Meter and leaving below the continuous slow MA (blue).
The strategy, built at the intersection of MA of different periods, is old, like the history of trading itself, and has drawbacks in the form of signal delay. Indicator developers advise evaluating the amplitude of the difference between the curves preceding the formation of their intersection: the higher it is, the more accurate the signal.
Indirectly confirm the trend will help the growing bars of the histogram, they are also involved in the creation of counter-trend reversal signals. To get them, the trader must observe areas with a large number of the same type of bull or bear candles.
- A fall in the strength of the bears (a decrease in the size of the red bars of the histogram) at new market lows will indicate a possible trend reversal in the direction of growth;
- A drop in bull strength with established new market highs is a signal of depletion of a growing trend and a possible reversal for a fall in the exchange rate of a currency pair.
The divergence strategy has been successfully used on various oscillators, which are the histogram indicators, given the limited maximum share of ticks of bulls and bears of 100%. Based on this, it will be easy for a trader to determine the levels (for example, 20 and -20) in the “basement” of the indicator, which will work as oversold and overbought zones.
Signals can become an additional filter restricting the trader’s transactions in other trading systems.
Developers Candle Meter MA numerically measured the number of ticks of bulls and bears, due to which the trader received a powerful Price Action tool, based not on a graphical analysis, but on specific values embodied in clear signals suitable for determining a trend and pivot points.
Despite the obvious advantages of such an analysis, strategies built at the intersection of MA, or trading in overbought / oversold areas, did not escape cases of delay or the formation of false signals.
To fully use Candle Meter MA, the trader will create a trading system with filters that solve the above problems. Otherwise, the indicator is convenient due to its versatility, which allows it to be used both in scalping and long-term trading strategies.