The market does not always move in a bullish or bearish direction in forex. Sometimes, it starts making ranges and then gives the breakout after the range. A trader can benefit a lot if they can detect the breakout. Buying or selling at the beginning of breakout also ensures high risk to reward ratios. But the question is, how can we know a breakout will happen? For this purpose, we can use the consolidation indicator for mt4. This indicator uses Ichimoku Kinko Hyo and Fibonacci ratios in combination to draw four channels on the trading charts. We can use these channels to understand if the market will break out or continue to move in a range.
Working of consolidation indicator for mt4:
When you apply the indicator to your MT4 charts, the indicator will draw four channels. These four channels exhibit four different types of information about the market.
- Channel 1: The most narrow channel in the center of the remaining three channels is silver-colored. That is why it is called Silver Channel.
- Channel 2: The channel out the silver color channel is colored in sky bluish. It is also called the Sky channel.
- Channel 3: This is significant and gives us valuable data for our trading strategies. You will notice that the price keeps fluctuating between the third channel most of the time. We call this channel Zen Channel.
- Channel 4: Fourth channel is also very significant and can act as a support or resistance for the price. And it is called Future Channel.
Settings on consolidation indicator mt4:
In the settings of this indicator, we can find the following parameters.
Shift – You can change how much offset do you want
TSP – This shows the future line’s prediction when the price shifts from left to right.
SSP – Here, you can change the calculation period for your indicator.
SilvCh – This value corresponds to the position of the silver channel. The default value is set to 38.8 Fibonacci
SkyCh – This value corresponds to the position of the sky channel. The default value is set to 23.6 Fibonacci
ZenCh – This value corresponds to the position of the Zen channel. The default value is set to 0 Fibonacci.
FutCh – This value corresponds to the position of the Future channel. The default value is set to 61.8 Fibonacci.
Trading Strategy for Consolidation indicator mt4:
The indicator in itself self does not provide us buy or sell signals. But from the charts, we can see that the price mainly fluctuates between Zen Channel.
Buying Strategy:
We can place Buy order when the price touches the channel low.
Selling Strategy:
We can place the sell order when the price touches the channel high.
Conclusion:
The market moves in range more than 70% of the time, and you can use the consolidation channel indicator to trade inside the periods when the market is ranging. You can use this indicator even if you are not very experienced because of its straightforward strategy.
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