RSI Filter MT4 Indicator – Free MT4 Indicator
The RSI Filter MT4 indicator is an improved version of the classical RSI indicator available on the highly developed MT4 platform. Unlike the classic RSI indicator which uses a line to show the current and the overall strength or weakness of a currency pair, the RSI filter uses a form of a histogram to gauge the momentum of a particular pair (see chart below).
The RSI Filter MT4 Indicator is superior not just because it’s easier to read it, as it has a better visual representation of the strength or weakness of the currency pairs, but because the RSI filter actually eliminates a lot of the false signals generated by the classic RSI indicator which makes it perform better in all types of market conditions.
RSI Filter MT4 Indicator Settings
The preferred settings for the RSI filter indicator is 20 which encompass 4 weeks worth of trading or 1 month. We find the below settings most suitable for our use. You can select your own settings but the below is what we find comfortable for our own use.
In order to change the colors of the RSI filter indicator go to the top menu and select Charts-Indicators List-RSI Filter MT4 Indicator-Colors and select red and green as this will give you an instant insights weather, we’re having a bullish or bearish momentum (see below).
RSI Filter MT4 Indicator Strategy
One of the most simplistic ways of using the RSI filter MT4 indicator is to only trade long when the RSI filter has turned green, indicating bullish momentum or to trade short when the RSI filter has turned red which is indicating bearish momentum conditions.
When the RSI filter indicator switched from bearish to bullish and vice versa, that’s the moment you what to get involved in the markets because that’s indicative of a shift in the trend’s momentum and above all we want to make sure we’re in a trade as early a possible, right from when the move is about to happen because otherwise as longer we wait to enter the market the riskier the trade becomes and the chances to turn against you while the profit margin diminishes. Without further ado, here are the RSI Filter MT4 strategy rules:
- Buy Signal: Check the 1h Chart and only trade long positions as long as the RSI Filter indicator is green. Downgrade to the 5-minute chart and initiate a long position at the moment the RSI Filter indicator turns from red to green using a protective SL of 10 pips below the last candle where the RSI Filter indicator was red. Take profit when the RSI Filter turns red.
- Sell Signal: Check the 1h Chart and only trade short positions as long as the RSI Filter indicator is red. Downgrade to the 5-minute chart and initiate a short position at the moment the RSI Filter indicator turns from green to red using a protective SL of 10 pips above the last candle where the RSI Filter indicator was green. Take profit when the RSI filter turns green.
RSI Filter MT4 Indicator Trade Example
Before downgrading to the 5-minute chart, we’re going first to look at the 1h chart which will give us the general market direction. In the chart below starting from the end of April, the RSI filter is bullish and this means only long position taken off of the 5-minute chart.
We’re only going to take Long positions in this interval once we downgrade to the 5-minute chart (chart below). Our long signal is generated once the RSI filter switched from red to green and in our case it really comes after a big movement in price, however, we can notice that the moment we got long there was little to no drawdown on our position. Despite trading off of the 5-minute time frame our exit signal only came a few days later being able to catch more than +100 pips on this trade.
You can use this strategy on longer time-frames as well as the applicabilities of the RSI Filter indicator are not restricted to just the short time frames. If you’re a swing trader you can apply the same rules to the daily chart as well.
RSI Filter MT4 Indicator – Recommended Time Frames
Technically speaking, you can use this MT4 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.
RSI Filter MT4 Indicator Download
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Visit our Free MT4 Indicator Download page. We hope you have enjoyed this post as much as we have creating it. Good luck and thank you for your readership.
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