Definition:
The Absolute Strength Indicator is designed for use with trend-following trading strategies. This technical indicator’s goal is to establish the trend’s strength and direction. To accomplish so, it considers:
- RSI or stochastic oscillator readings.
- The market’s upward and downward movement throughout the given timeframe.
| Indicator Title | Absolute Strength Indicator |
| Indicator Size | 35.3 KB |
| Trading Platform | Metatrader 4 |
| Indicator Type | Information |
Working of the Absolute Strength Indicator?
The Absolute Strength Indicator for MT4 helps you trade in a trend. It doesn’t repaint. The indicator uses data from RSI and Stochastic oscillators to build 2 main and 2 signal lines:
The primary lines provide clear indications of the trend’s intensity and direction, either bullish or bearish. Finding entry and exit points is more accurate when using signal lines. By examining signal history, you may adjust the Absolute Strength Indicator for MT4’s parameters to best match your trading preferences and track trends entirely automatically.
The interpretation of the main solid lines is very simple:
- If the red line is above the green line, it means that the trend is bearish.
- If the green line is above the red line, it means that the trend is bullish.
- The more distance between the lines, the stronger the trend.
- If the line gets narrower, it means a weakening trend.
In addition to the main solid lines, the indicator displays dashed signal lines. Signal lines perform an assisting function for finding accurate entry and exit points.
Trading with Absolute Strength Indicator
Buying Order
A basic buy indication is sent when the green line crosses the red line upward. Put a stop loss order under the previous local low as protection.
Use the main and signal line crossings (shown by the blue arrows) as a starting point for:
• Track the stop-loss.
• To increase a long position.
• Shorten the position.
Selling order
When the solid red line crosses the green line upwards – this gives a basic sell signal. Place protective stop-loss above the previous local high.
Use the crossovers of the main line and the signal line in red as a trigger to:
- Trail stop-loss.
- Add to a short position.
- Cutting off the short position.
Conclusions
This Absolute Strength Indicator for MT4 will give you erroneous signals just like many other trend-following tools do, especially during protracted flat periods.
Therefore, be cautious that using this indicator for trading won’t damage your deposit. To achieve this, practice trading first with a preferred broker on a demo account. Additionally, consider combining indicator signals with other technical analysis tools; combine daily and intraday signals, and concentrate on sell signals near resistance zones and purchase signals near support zones.
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