How often, dear reader, are you faced with the task of determining the current state of the market? I think that the answer will be: "Every time I go to Forex, when I look for entry points to open trades and the moment to close a trade with a profit." It turns out that all decisions and actions of a trader are determined by the state of the market and the price movement in a specific period of time. There are many trading methods, systems and tools that can filter certain market sentiments. We will talk about one of these tools, Trend Filter, today.
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Trend Filter is an indicator that "observes" the trend and shows its flat areas, areas of uncertainty, oversold/overbought. This multi-currency tool can be used to trade crosses and currency pairs dependent on the dollar. The indicator is very efficient and does its job equally well on all timeframes. Naturally, the indicators of the indicator curve change in accordance with the current state of the market on the selected timeframe.
Setting and configuring Trend Filter properties
The Trend Filter indicator is installed in MetaTrader 4 in the same way as other tools of the standard package built into the terminal. But you will not find this tool there, you will need to download it from our website. After downloading and extracting the archive file from Trend Filter, load the terminal. Now drag the instrument onto the chart from the Navigator window or by following the path: Insert → Indicators → Custom → Trend Filter:
Figure 1. Transferring the Trend Filter indicator file to a chart in MT4
The first thing you will see before the tool sets its window on the main chart is its settings window:
Figure 2. Trend Filter indicator settings window on the chart in MT4
Let's look at what properties the Trend Filter indicator has, which of them can be changed, and which are not recommended to be changed:
Figure 3. Tabs with Trend Filter properties in its settings window
In the standard settings, its properties in the tabs have the following options:
- "About the program" - see Figure 2.
- "General" - do not change anything, leave the entire policy unchanged.
- "Input parameters" - do not change:
- parameter "Nbars" = 89, this is the period that the indicator algorithm will analyze; this algorithm is based on the principle of moving average; reducing this parameter will reduce the delay time of the signals, but will reduce their quality.
- parameter "MA_Period" = 9, it is responsible for the smoothing level of the moving average curve; with its help, you can adjust the number of flat sections of the trend that the indicator shows; increasing this parameter will reduce the number of curve entries into the oversold / overbought zone.
The main task of the Trend Filter indicator is to indicate the dominance of a flat or trend movement. If his curve falls into the oversold / overbought zone, he does not specify the value of the levels of this zone.
- "Colors" - on this tab, the user can change the color signaling; The default colors are yellow, green and red.
- "Levels" - there is nothing to change here, the levels in the operation of this tool are important only for its algorithm, but not for the trader.
- "Display" - on this tab, you can specify the timeframes for displaying the Trend Filter window. Since the indicator works on any timeframe, there is hardly any need to change anything here.
After installing and configuring the Trend Filter indicator on the chart, the MT4 terminal window will look like this:
Figure 4. Appearance of the working window in MT4 after installing the Trend Filter indicator
As you can see in Figure 4, the indicator is placed in a separate window, “in the footer” of the main chart window. We see that the indicator draws a single curved line, the segments of which are colored in different colors. Now we will consider the meaning of each such segment and find out what it all means and how it will help the trader in trading.
In general, Trend Filter is an indicator, the principle of which is intuitively and clearly understandable even for a beginner in Forex trading:
- yellow line
This line is formed during a trend movement and shows the active phase of the trend. It moves from the lower border of the Trend Filter indicator window towards its upper border and back. At these edges, it transforms into a green (at the top border) or red (at the bottom border) line.
- Red line
It can be seen at the very bottom of the indicator window and indicates the formation of a passive flat phase or the beginning of a downtrend.
- Green Line
The indicator draws it at the top border of its working window. Its appearance indicates that the passive phase of the uptrend is beginning to form or its lateral movement begins.
Assessing the state of the market, the Trend Filter algorithm displays the results of this assessment in the form of a line that changes color in accordance with the existing market trend. The slope of the indicator line also helps to reveal a trend change. So, if it is tilted down - quotes are falling, up - they are growing. ForTrader.org magazine experts note that this tool has another great advantage - it does not redraw. Therefore, if the bar closes and the indicator shows a growing trend, then the algorithm is 100% sure of this.
How to work with the Trend Filter indicator?
You can trade with the Trend Filter indicator with any currency instrument on any timeframe. It is not recommended to use it as a separate instrument, since it only shows the direction of the trend, without indicating an approximate possible entry point to the market. Combining it with traditional oscillators, you can get a good trading result. You can achieve greater efficiency from it if you include it in your trading system.
You can check its effectiveness on the example of the Sniper trading system, a special course of which the Forex Academy provides absolutely free of charge. With its help, we will teach you to make a profit of more than 57% of the deposit in 30 calendar days. Since this trading strategy does not need any indicators or oscillators at all, by supplementing it with the Trend Filter tool, you can be sure of getting high profits. We will send the full special course "Sniper" to your e-mail if you leave us its address:
Example of trading with Trend Filter
Trend Filter will harmoniously fit into any style of trading. Let's test this with a very simple example. Our trading approach will be based on just two instruments. One is the Trend Filter indicator and the other is the XCode indicator we recently reviewed.
The first one will show us the state of the trend, and the second one will give signals about a possible entry into the market with a sale / purchase. Our main task is to follow the signals of these two indicators. To open a trade, we need two important conditions to be met:
- From XCode, we are waiting for the appearance of a red or blue arrow on the chart - it catches the moment of the formation of a new trend.
- We expect only the yellow line to be drawn from Trend Filter - it will allow us to open a deal at the beginning of a new trend. If the yellow line begins to change into a red (on a downtrend) or green (on an uptrend) line, this will be a signal for us to close the deal.
So, let's look at the readings of the XCode indicator, and when the trend changes, look at the line of what color the Trend Filter indicator draws. Then it will decide whether it makes sense to open a trade or whether we are a little late in making an important decision. In the process of trading, different situations may develop, now we will try to consider them.
Situation 1: Can't buy!
We don't enter with a buy when XCode shows a blue arrow (Trend Up Buy) and the Trend Filter curve is colored red or green. This situation should not be considered by you as a signal to open a buy trade:
Figure 5. An example of searching for buy entry points based on Trend Filter and XCode signals
Situation 2: Can't sell!
Suppose that XCode has drawn a red arrow (Trend Dn Sell) on the main chart at the moment when the Trend Filter indicator line is colored red or green. This is not a reason to open a deal to sell, we should not be interested in such situations:
Figure 6. An example of searching for sell entry points based on Trend Filter and XCode signals
Situation 3: Signal delay
In practice, it often happens that XCode gives a Buy/Sell signal, but the desired signal from the Trend Filter indicator is late. What decision should a trader make in such a situation? Pay attention to Fig. 7, which shows a similar situation - there is a buy signal, but the Trend Filter curve is late and is still colored red. At the moment, you can not open a deal, because it is not known how the price will behave further.
Figure 7. An example of entering the market when the Trend Filter signals are delayed
And then we see that the curve turns yellow, and the buy signal from XCode is preserved. If you take a risk and open a Buy position at a price of 1.1595, and close it at a price of 1.1620 - when the yellow curve changes and turns green, you can earn 25 points. Of course, such a deal can be called risky, but risk issues always require a subjective decision.
Situation 4: Ideal Market Entry
When a Buy/Sell signal is received from XCode and the Trend Filter curve is colored yellow, this is the perfect moment to enter the market. Moreover, for the purchase it should be directed from the bottom up, for the sale - from the top down:
Figure 8. An example of entering and exiting the market based on Trend Filter and XCode signals
In Figure 8, you can see that the XCode sell signal coincided with the beginning of the drawing of the yellow line of the Trend Filter indicator, which is the ideal moment to enter the sell market. On this deal, on the M30 timeframe, "without being greedy", we would have earned 168 points. If we talk about "greed", then one could try to hold the position without changing the indicator arrow on the main chart.
Figure 8 shows that we could continue to hold the trade and close somewhere around the price of 1.1566 in order to get even more profit. In the conditions of our experiment, the trade is closed when the Trend Filter indicator changes its color from yellow to green or red - which is what we did. Please note that when opening a deal arbitrarily, we did not set target levels, but studied the coherence and effectiveness of these two indicators. A detailed video on working with Trend Filter can be seen below:
Summing up
The Trend Filter indicator is very simple visually, but very interesting to work with. It is universal and will help the trader to make significant profits in combination with any other tools or trading systems.
Paired with the XCode indicator, it worked out the sell trade perfectly. The essence of trading comes down to the coincidence of the signals of these two indicators. When Xcode gives a signal about a trend change, the Trend Filter curve should be colored yellow - this is the signal to enter the market. The tool is very interesting. Experiment with it, express your opinion regarding its operation.
Good luck to everyone and see you soon!
Forex flat filter indicators in our DailyFX forex webinar series our 1st webinar focuses on creating a simple strategy using strength oscillator, support/resistance levels, positive risk/reward ratio and risk calculator. This lesson usually ends up with a lot of questions from traders trying to find a bigger edge by putting together more tools than those provided, which is a good thing. It's great to experiment and test different ideas.
However, the problem I have is that many traders try to use tools without fully knowing the strengths and weaknesses of the tools; often group similar indicators together or leave out an important set of tools that might be worth considering. So today I have broken down 3 tools known as "filters" - forex flat filter indicators - that can be used in different types of strategies.
Forex flat filter indicators
We have all heard the saying “the trend is your friend” or “trade the path of least resistance”. These phrases are used by traders who want to trade in the same direction as the overall trend. But what if we find it difficult to determine the trend? What should we do if we are not sure about
shifting our direction?
A great tool to add to a trend-based strategy is the 200-period simple moving average. By averaging the closing price over the last 200 bars, we can see if the current price action is above or below the average.
Learn Forex: 200 Period Simple Moving Average.
Any time we see price above the 200 period moving average line, we should look for buying opportunities. Every time we see price below the moving average line, we should look for selling opportunities. This ensures that we are trading in the same direction as the prevailing trend.
We can also take into account the strength of the existing trend by how far the price has moved from the 200-period moving average. The further the price is from the average, the stronger the trend. This can be seen in the chart above. A strong downtrend followed by a more tame uptrend.
To soften the trading range during these transitional periods, we can use a technical indicator called the Average Directional Index or ADX. ADX is not a direction filter. This is a filter that tells us if the currency pair is trending and we are not. The higher the ADX, the stronger the up or down trend. The lower the ADX, the more the currency pair moves sideways.
The chart below shows a period of time when the price trended and then changed to a range. The key level for ADX is 25. When ADX is below 25, we should focus on trading range strategies. Any value above 25 is not suitable for range trading and may be suitable for trend trading if the ADX moves high enough.
By eliminating our range trades when the ADX is above 25, we are more likely to make a profit.
Filtering any other strategy. The last filter on my list is the Universal Speculative Sentiment Index, or SSI. SSI tells us the ratio of buyers and sellers of each major pair. We want to use SSI when looking for trading opportunities against the retail crowd. So when most people are buying, we should be looking for sales, and vice versa.
For more information on using SSI, read My Favorite Trader Tool, How to use SSI. Learn Forex: a chart showing the feedback between price and SSI
Fine tuning with filters. I hope this article has given you ideas on how to improve your own strategy, whether you are trading trends, ranges, or something else entirely. If you'd like to test any of these filters risk-free, download a free demo account today with free charting and real-time price data. Happy trading!
Flat filter indicator
The MT4 flat filter indicator is based on a filtered moving average. The indicator displays the trend after the filtered signals directly on the chart, and its signals are very easy to understand and trade. The trend filter for Metatrader 4 draws a colored line in a separate MT4 window. The green lines show that the trend is up and it is time to open a buy position.
The red lines show that the trend is down and it is time to open a sell position. Yellow lines indicate that the trend is range bound or flat, and we are waiting for a new trend direction, we will stick to the current trading position. The default period for the MA period filter is set to 9, but this value can be configured.
Scalpers, day and swing traders can take advantage of this forex indicator as well.
The main trading signals are as follows:
- The signals from the Trend Filter Forex MT4 indicator are easy to interpret and look like this;
- Buy signal: Open a buy position when the indicator draws a green line (bullish trend);
- Sell signal: open a sell position when the indicator draws a red line (bearish trend);
- No signal: yellow line, stick to current buy/sell position;
- Trade Exit: Close an open trade when the opposite signal appears, or use your own trade exit method.
Flat filter
It is often said that a flat is a "killer" for trend traders' deposits. It really is. If your trading system performs well in the event of a strong trend in the market, it will not perform well in the event of a flat market.
Experienced traders who use the flat filter know that after a sideways movement, the price often moves in a trend. A long-term flat can be used as a signal for a further uptrend, although this is not always the case.
The flat period is a period of uncertainty when it is difficult to make any predictions. When the price moves in a narrow range without a directional move, it is almost impossible to determine the direction of the future movement.
Trend and flat. A trend is a directional price movement. There is a bullish trend - in the financial markets, this is an increase in asset prices. This trend is associated with a bull that tosses prey on its horns. There is also a bearish trend when the price of an asset falls.
This trend is associated with a bear that swings its prey from top to bottom. A trader should always consider the current trend and trade according to it. In the case of an uptrend, the trader should buy, in the case of a downtrend, the trader should sell.
The trend is a trader's friend. Lateral movement is also called flat. I define flat as a sideways trend. It helps to understand reversal patterns in Forex. Price action can not only change from an uptrend to a downtrend, but it can also go sideways!
This is a fact that is often overlooked by many traders who are losing money. Flat in Forex is a period of time when the strength of bulls and bears are equal, which makes it difficult to form a certain trend; therefore, the price does not have a definite trend and moves in a certain price range. Flat is a trap for inexperienced traders.
Methods for determining market conditions. I use three methods for determining the state of the market: indicator, graphic and session. Let's take a closer look at them.
Volume indicators can be used to confirm an apartment. Usually during the apartment period they show lower values than at other times. However, if the trading channel has a wide range, the trader should use some other tools to determine the market conditions.
The indicator is based on the theory of financial time series, which represent fractal time functions.
Using the indicator in trading:
- If the indicator is less than 0.5, it shows a trend. A low value indicates that the trend is weakening or that a correction may begin;
- If the indicator is greater than 0.5, it shows a flat. A very high value indicates the development of a trend;
- If the indicator is around 0.5, it shows uncertainty, in which case it is better not to trade.
The iVAR indicator can be used as an additional signal confirming the signals of other indicators. It shows the formation of a trend, but does not show the direction of movement.
An alternative possibility is to trade inside the channel, but you must take into account that the distance from the upper to the lower lines must be large enough.
Sometimes the shape of a candle helps determine market conditions. If the candle body is unusually short and the hue is very long, this indicates that neither buyers nor sellers have an advantage in the market.
Session method for determining an apartment. This method is especially useful for intraday trading. Forex trading is available 24 hours a day, but in reality a trading day consists of several trading sessions.
This method is based on considering each trading session separately; as a rule, after a period of price consolidation, the price begins to move strongly in any direction.
If during one trading session the price was in a flat, then during the next session the price may move in a trend, and vice versa.
The figure above shows the main trading sessions and a five-minute chart of the EUR/USD currency pair.
The meaning of the symbols on the chart:
- Ao — opening of the Asian session;
- Lo - opening of the London session;
- New York - opening of the New York and American sessions;
- Lx - closing of the London and European sessions.
In area 1, which is the Asian trading session, the price moves in a narrow channel (about 30 pips); With the opening of the London session (area 2), the price moves in a strong trend.
The activity of various trading instruments varies during trading sessions. For example, the volatility of major currency pairs increases significantly after the opening of the London and US markets.
Remember! The trader should study well all the information about the indicators he/she is going to use to determine the market conditions; Indicators are used only as additional market analysis tools.
If you are using the graphical flat detection method, don't forget to look at the higher timeframes. Different time frames may show different market conditions.
Consider important macroeconomic statistics and economic news, as they influence the direction of movement.
Try not to trade flat as it can be very risky.
Once again I welcome you to the pages of our blog! Today we will analyze a very, very important topic of signal filtering. This topic will be especially important for trend speculators. I explain why, any trend system faces the problem of interpreting signals in a flat, in order to filter out signals that form in a sideways trend, traders use various filters to determine the flat. Based on this, we have prepared for you the best interpretations of filters for determining flat zones.
For each tool presented, we will give our own tips and recommendations. We will analyze in detail how to use each of the tools, as well as draw your attention to some of the nuances that appear when working with almost any indicator.
Flat filter indicator Trend&Flat (Download )
First on our list is an indicator for identifying the three market conditions, down, up, and flat. This tool is displayed in the basement window of the Metatrader bar chart. The principle of its operation is quite simple, if the market is in an uptrend, then the histogram of the indicator is painted in a green dotted line. If the market is in a downtrend, then a red dotted line is formed on the histogram. If the market is flat, then in the basement window you will see a gray solid bar.
I think everything is simple and clear about the entries here, in case of a flat, we do not trade, we work with the trend, we wait until the price reaches a strong level or line and open an order, remember once and for all, each transaction should be based on something, levels are excellent zones, for which it is profitable to hide your stops.
Flat and Trend indicator
The best flat filter PulseFlat (Download )
The second indicator in our review for determining a flat of a histogram type. This tool builds a histogram based on the McDuck principle. The instrument is displayed in the basement window of MetaTrader.
It is quite easy to work with the indicator readings, if you see bright red bars on the chart, this indicates that a strong “bearish” impulse has begun. If you see the growth of blue bars, it means that the momentum is now ascending.
Pay attention to the weakening of the momentum, if the momentum becomes weaker, then the color of the tool changes to a dimmer color, depending on whether the histogram is above or below zero. And of course, the green dots tell us that the market is flat now and the price is squeezed in a narrow corridor.
Flat detection indicator PulseFlat iVAR flat filter (download )
This tool works on the principle of calculating the variational index, which is made up of the dimension of the fractal derivative. All values are displayed as a line in the basement window, the line has borders from 0 to 1. Signals will be given to us by a curved line that rotates around the central level 0.5. Let's take a closer look at what signals this analytical tool can give.
Signal variations iVar indicator:
- If the basement line is below the level of 0.5, then we interpret this signal as a trend signal
- If the line approaches 0, it means that the trend is coming to an end.
- If the basement curve is above the 0.5 mark, it is considered that the market is flat or flat.
- If the curve is trading around the 1 mark, this tells us that there is a high probability of a strong trend developing.
- In case the curve is trading around the 0.5 level, this means that the market does not know where to go.
That's all the interpretation of the indicator, which determines the flat and trend zones. The advantage of this tool is that the tool can show the end of the trend and its weakening.
Ivar flat tool Forex flat filter. Xaser indicator (download )
This tool is also a basement indicator and lays out all its readings for analysis at the bottom of the bar chart in the form of a moving curve. After we drop the tool on the chart, you will see a curve that either rises or falls, in fact - this indicator indicates the entry point after the flat. If the curve is pressed to the bottom of the basement instrument, then the market is flat, as soon as the curve begins to move upward, this means that you can enter into a deal.
The developer also notes that after the signal, when the curve reaches its top and starts to fall down, this will mean that the trend is ending or weakening, in which case it would be logical to exit the transaction.
Xaser indicator Flat indicator MA SquizeMA Ed (download )
This analytical tool differs from the above, its difference is that it shows flat and trend zones not in the bottom of the chart, all readings of the tools are visually available on the price chart itself, some traders like it, and some like clean charts, so we specifically made selection so that you can choose exactly “your” tool for filtering signals.
The algorithm for calculating the signal was developed on the basis of the legendary and already familiar moving averages, but with an emphasis on the calculation of moving averages with a more pronounced emphasis on flat areas. After installing the tool on the chart, you will see two main moving averages of red and blue, which indicate the direction of the trend. In the case of a flat section, two more moving averages appear, but already yellow, and it is they who tell us that there are no large movements in the market and the price is trading sideways.
You can also use flat moving averages as a flat price corridor, it will be very convenient for fans of flat trading, since in such cases it is beneficial to open orders from the channel boundaries.
MA SquizeMA Ed flat and trend indicator Legendary filter Alligator
The last indicator in our review will be the Alligator indicator. The peculiarity of this tool is that it does not need to be downloaded and it is installed in almost every terminal of both MetaTrader and other terminals, very often it can be found even in browser terminals, which makes this tool universal for trading on any platform.
In general, the topic of the Alligator is quite wide, the not unknown Bill Williams wrote a book about trading on this instrument, we advise you to read the book, as there you will find a huge amount of the most useful advice. Bill suggests using the instrument in conjunction with fractals and the Awesome Oscillator, which is also a standard instrument of the MetaTrader terminal.
In order to interpret the flat on the chart, it is necessary to wait for the moving averages to intertwine, if the line width grows, this may tell us that there is a strong trend movement in the market
Alligator as a flat detection tool Summing up
Above, we presented you with an excellent collection of indicators for signal filtering. We strongly recommend that you do not trade on one instrument, but use filter indicators in your work, which very well determine what stage of trading is currently on the market. In addition, I would like to note the trading sessions, the Asian session is considered a flat time, while the European and American trading sessions are considered highly volatile and trend movements most often occur during the trading of America and Europe.
The Trend Filter indicator is a high-quality filter that helps to quickly determine the current market situation. Of course, you can try to conduct a simple visual market analysis, but in terms of objectivity, it will be ineffective.
The use of Trend Filter, which uses a special algorithm in its work, allows you to constantly analyze the market and receive objective data.
Description and settings of the Trend Filter indicator
Everyone knows that there are a large number of ways to determine the market condition, but the use of the Trend Filter filter indicator is one of the most effective methods at the moment.
We note right away that this indicator, as its description shows, is another one, but Trend Filter differs from them in that the main task of this algorithm, is a trend and flat display without a specific definition. In general, we can safely say that the Trend Filter indicator is a trend algorithm, which has all the main features of this group.
Having carefully studied the description of Trend Filter, we see that the indicator is installed in the trading terminal in a standard way, so we will not dwell on this issue in detail. The indicator is placed in a separate window - at the bottom of the main field of the price chart.
In the indicator window after installation, you will observe the only line that, during the operation of the algorithm, can change its color to green - an uptrend, red - a downtrend, yellow - a state of uncertainty.
Now consider the description of the settings, which in the Trend Filter indicator are quite simple, since they consist of only two main parameters:
- Nbars - defines the period;
- MA_Period - defines the period.
For example, it makes sense to reduce the period of the indicator, so you will make it more sensitive to market movements and will receive more signals. It should be noted that quantity affects quality.
Regarding the advantages of the algorithm, the main one is the absence of redraws after the candle is closed. That is, if the Trend Filter algorithm has determined any direction, then it is completely sure of it.
As noted above, the main task of the Trend Filter indicator is to identify the trend, so we will begin the description of the application of this algorithm with these signals.
- when the indicator line turns green, open a long position;
- when the line is colored red - sell;
- when painted yellow - refrain from making deals.
This kind of approach seems really logical, but there is a small problem. The fact is that users of the Trend Filter indicator cannot independently set the boundaries of the indicator scale, after crossing which the indicator line will change color.
Of course, in the tab " Levels» This parameter is configurable, but it does not affect the result. You can verify this by looking at the figure below.
We can see that the buy signals were also late, and because of this, a potentially profitable trade turned out to be a loss.
Therefore, experienced users of this algorithm recommend not linking Trend Filter signals to specific colors, but focusing on indicator levels.
So good results can be obtained using the following strategy scheme:
- the purchase is made after the indicator line crosses the level -0.5 from the bottom up. The deal is closed according to the standard - the functional value closes below 0.95;
— we make sales after the indicator line crosses the level 0.5 from top to bottom. We close the deal when the color of the indicator line changes from red to yellow.
We see that the quality of the Trend Filter signals has improved significantly, but still the entry points were formed late, when the rollback had already managed to "eat" a certain part of the profit.
This problem is solved by combining two Trend Filter indicators with different parameters.
According to the indications of one (base) we will enter the trade, and according to the signals of the second (with a shorter period), we will exit the position.
We note right away that indicator periods, like timeframes, must be optimized for each of the traded instruments.
Do not forget about the smoothing function, the value of which depends on the nature of the traded instrument.
So, the more noise on the instrument, the longer the period of the moving average should be. In general, it all depends on what trading strategy is used by the user of this algorithm. Below we propose to consider one of the options for such strategies.
Trading strategy based on the Trend Filter indicator
So, we already know that the Trend Filter indicator shows traders the presence of a flat or a trend in the market, and if there is a second trend, also its direction. This is the basis of the trading strategy we are considering using the Trend Filter.
As you know, the higher the time interval used in trading, the more reliable it will be, therefore this trading strategy provides for work on the H4 chart. As a traded instrument, we will use a pair of currencies EUR/USD.
Trend Filter indicator, set up as follows:
- Nbars (50),
- Ma_period(9)
- and set the levels 0.899, -0.899.
Entry conditions according to the strategy based on the Trend Filter indicator
Buy deals are opened when Trend Filter is below the -0.9 level for more than 7 candles in a row, draws a red line, and then draws a blue segment, having risen above the -0.9 mark. We enter the market on the next candle. StopLoss is set at a distance of 30 to 60 points behind the nearest local minimum.
When the profit reaches 30 points, you can transfer the deal to breakeven and close 50% of the open position. When the profit reaches 50 points, we start the rest of the transaction volume at the Trailing Stop 50 points long.
Sell trades will be opened when the Trend Filter, being above the 0.9 level for more than 7 candles in a row, draws a green line, and then draws a blue segment, falling below the 0.9 mark. We enter the market again on the next candle.
Set StopLoss distance from 30 to 60 points behind the nearest local maximum. Exiting a sell trade is done in the same way as in a buy trade, but in a mirror image.
You should take into account some features that this trading strategy involves using the Trend Filter indicator:
- you can not trade at the time when they exit;
- you can’t trade when the Trend Filter indicator signal appears on candles with excessively large bodies;
- it is necessary to close positions if Trend Filter returns back to the flat zone.
Overview of the Trend Filter indicator
The price of any market asset at any time can be in one of three states - grow (uptrend), fall (downtrend), slightly fluctuate around a certain level (flat). The most useful for a trader are trend periods - you can always make money on them (and if you trade incorrectly or unsystematicly, you can lose all your capital). But flat conditions are not only useless, but also dangerous, because they do not allow you to accurately determine in which direction the market will move. Therefore, most traders prefer to refrain from trading during flat periods. For this they use Forex flat filters indicators, whose signals provide a clear identification of trend periods and sideways price movement.
Further in the article, various technical tools for determining flat states will be considered with a detailed description of the principle of operation and conditions of use. All of them cannot be used as an independent indicator, but only perform the function of filtering false signals from other technical instruments.
Flat filter indicator Trend_and_Flat()
After installing it on the price chart, a basement window is formed (Fig. 1), which displays areas of three colors:
- red - indicates a downward trend in a given period;
- green - indicates an upward trend in a given period;
- gray - indicates a lateral movement in this period.
Flat filter Pulse_Flat()
It is displayed in the basement window as a histogram, the columns of which can change color, direction and distance from the zero level (Fig. 2):
- red bars pointing down from the zero level indicate a downtrend;
- blue bars pointing up from the zero level indicate an uptrend;
- green dots at the zero level are a signal of sideways price movement.
The distance of the bars from the zero level is directly proportional to the strength of the trend.
Flat filter for Forex iVAR ()
This technical analysis tool is based on the calculation of the variation index, which is derived from the fractal dimension. The value of this index can be in the range from 0 to 1. When applied to a financial instrument, the iVAR indicator forms a basement window under the price chart (Fig. 3), in which a curve is displayed that describes the trajectory around the central level 0.5.
The interpretation of these signals is as follows:
- if the curve is below the level of 0.5, then there is a trend in the market;
- if the curve approaches level 0, then the current trend ends;
- if the curve is above the level of 0.5, then the market is flat;
- if the curve approaches level 1, then a strong trend is likely to form;
- if the curve fluctuates around the level of 0.5, then the market is in a state of uncertainty.
Forex flat filter indicator Xaser ()
After applying a financial instrument to the chart, a window is formed below it, in which a curve is displayed, consisting of straight, rising and falling sections (Fig. 4). If the curve is at the zero level, then during this period the market is in a flat state. The growth of the curve from the zero level upwards indicates that the next trend is gaining strength, and the fall to the zero level downwards is a signal that the current trend is losing strength.
Trades are recommended to be opened when the indicator line moves up from the zero level. And if it starts to approach the zero level again, moving down, then this indicates the need to close the deal and take profits. On fig. 4 favorable moments for opening positions are indicated by checkmarks, and the moments of their closing are indicated by red vertical lines.
Flat filter indicator MA_SquizeMA_Ed ()
The lines of this technical instrument are displayed directly on the price chart (Fig. 5). Its algorithm is based on moving averages, the calculation scheme of which has been somewhat adapted for a better response to a flat. For this purpose, the display of two more lines was introduced into the indicator - yellow and brown.
When the indicator displays 4 lines - red, blue, yellow and brown - this means that the asset is in a flat state and it is better to refrain from transactions. Additionally, MA_SquizeMA_Ed shows the dynamic width of the lateral movement channel (it is proportional to the distance between the yellow and brown lines).
Forex flat filter indicator Alligator
This technical tool is included in the standard set of indicators of the MetaTrader trading platform. It is displayed in the price chart window as three curves of different colors - green, red and blue (Fig. 6). The signal of the beginning of the flat is the intertwined state of these lines with an almost horizontal movement.
The best flat filter
Among the described technical tools, it is impossible to single out any one that has a complete advantage over the others. Each of them is optimal in a certain market situation and in combination with specific technical tools. A trader chooses a set of technical instruments, the signals of which he will trade, based on the strategy used, personal preferences and test results on historical data or on a demo account.
