Retracement Finder MT4 Indicator – Free MT4 Indicator
The Retracement Finder MT4 Indicator is a forex trading strategy which is based on mild price retracements. We can also call this an indicator retracement entry strategy. A retracement is defined as an area where price action which has been in a trend pulls back a little in the opposite direction as a result of profit taking, prior to resumption of a new move in the direction of the initial trend. With the Retracement Finder MT4 indicator, the strategy is a little different. Here, we look out for retracement areas on the indicator histogram bars and not price itself. On the price, we simply look for areas where price action forms minor stalls, which can be used as areas of support and resistance to initiate new entries once the indicator has ended its retracement move.
The Retracement Finder MT4 Indicator – Trading Rules
The indicator is made up of histogram bars. These bars are coloured and represent the following:
- Blue: BUY (or LONG)
- Red: SELL (or SHORT)
- Yellow (get ready: please note this is my terminology and not a standard forex term)
The strategy entails spotting the area where the Retracement Finder indicator, having earlier crossed into positive or negative territory, starts to retrace to the zero line. At the same area, the price lows or highs are seen to form minor support and resistance areas. It is from these areas, delineated by small trend lines, that the trader can make a retracement entry. The strategy is demonstrated for long and short entries below.
LONG TRADE ENTRY RULES
The long trade entry signal occurs when the following is seen on the charts:
- The Retracement Finder MT4 Indicator.ex4 starts to retrace to the zero line after being in positive territory, with bars showing a blue colour.
- The price action candle lows start to form at the same level, so that a support line can be drawn at the candle lows.
- The long trade entry is made when the next candle pulls back on the support line and bounces off it.
A close look at the chart will show that the blue indicator histogram bars are getting shorter around our demarcated trade area, indicating a retracement at the indicator level. At the same time, price candle lows are forming at the same horizontal level, providing a sound support base for the trade. A BUY LIMIT trade with entry price at the brown support line would be a good way to enter and follow the price action eventually it takes off from the support.
Stop Loss and Take Profit Settings
The Stop Loss is set a few pips below the support line as shown. This is done so that the support line drives a candle bounce that ends up safeguarding the stop loss. The Take Profit point should be set at a point which corresponds to the indicator histogram bar at its highest point.
SHORT TRADE ENTRY RULES
The short trade entry signal occurs when the following setup is seen on the charts:
- The Retracement Finder MT4 Indicator, having been in negative territory with red bars, starts to retrace upwards to the zero line.
- The price action candle highs start to form at the same level, so that a resistance line can be drawn across the candle highs.
- The short trade entry is made when the next candle pulls back up to the resistance line and is rejected at that level.
Observe the chart closely. You can see that the red indicator bars around the trade area are getting shorter, indicating a retracement towards the zero line. At the same time, price action has stalled at a high, providing a short term resistance on which the trade can be setup. Once the candle high resistance has been hit, a SELL LIMIT set at the brown resistance line will play out nicely.
Stop Loss and Take Profit Settings
The Stop Loss is set a few pips above the resistance line as drawn on the chart snapshot.
The Take Profit point should be set at a point where the red bars of the indicator are at their lowest amplitude.
Technically speaking, you can use this indicator for all time frames. However, the shorter the time frame, you will see more fluctuation and possibly more whipsaw which may cause small losses that can eat up your portfolio quickly. We recommend that you use higher time frames like the 4H for better consistency.
Trading with Retracement Video Tutorial
Trading with Retracement
Retracement Finder MT4 Indicator Download
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