Dots Indicator for MT4

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Dots MT4 Indicator

Introduction to the Dots Indicator

Momentum signals are some of the most basic trade signals that traders use to confirm the opening of a trade. This is because most momentum signals are very responsive to price action movements and have less lag. The Dots Indicator is a momentum indicator which indicates the current direction of the momentum of price action.

What is the Dots Indicator?

This Dots Indicator plots dots on each candle to indicate the direction of the momentum of price. The color of these dots changes to indicate the direction of the momentum. It plots blue dots to indicate a bullish momentum and red dots to indicate a bearish momentum.

Dots Indicator for MT4

How the Dots Indicator Works?

The Dots Indicator uses an underlying moving average with a short term bias to detect the direction of the momentum. It detects momentum direction based on the cosine of the change in the slope of the underlying moving average line.

How to use the Dots Indicator for MT4

The Dots Indicator has several options within its indicator settings.

“Length” refers to the number of bars used by the indicator to compute for the direction of the momentum.

“AppliedPrice” refers to the price point source on each bar used by the indicator, whether it is the open, high, low, or close of the candle.

“Filter” and “Deviation” are additional variables used within the indicators formula.

“Shift” refers to the shifting of the underlying moving average line forward or back.

How the Dots Indicator Works

This indicator can be used as an entry signal indicator based on the changing of the color of its dots. However, these signals should not be traded as a sole basis for a trade. It should be in confluence with other technical indications.

For example, traders could use these momentum reversal signals as reversal entry signals developing on support and resistance levels. It can also be used in a trend continuation setup as a signal of the resumption of momentum in the direction of the trend after a pullback.

Buy Trade Setup

When to Enter?

Identify an uptrend market based on a rising price action. Wait for price to pullback and the dots to temporarily change to red. Open a buy order as soon as the dots change back to blue. Set the stop loss on the support below the entry candle.

When to Exit?

Close the trade as soon as the dots change back to red.

How to use the Dots Indicator for MT4 - Buy Trade

Sell Trade Setup

When to Enter?

Identify a downtrend market based on a dropping price action. Wait for price to pullback and the dots to temporarily change to blue. Open a sell order as soon as the dots change back to red. Set the stop loss on the resistance above the entry candle.

When to Exit?

Close the trade as soon as the dots change back to blue.

How to use the Dots Indicator for MT4 - Sell Trade

Conclusion

This indicator can be a very useful entry signal indicator using momentum reversals as a basis for a trade entry. Since its momentum reversal signals have less lag, traders can open trades a bit earlier than other trade signals and squeeze in some profits. However, along with its responsive signals comes some false signals. As such, it should be used only when in confluence with other technical indications.

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Dots Indicator for MT4

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