Introduction to the FX Chaos Second Edition Indicator
The Awesome Oscillator (AO) is one of the most popular oscillators. In fact, there are many profitable retail traders who use it to make profits from the market. However, it does tend to lag at times.
The FX Chaos Second Edition Indicator is very similar to the AO, but with subtle differences making it more responsive to price action signals.
What is the FX Chaos Second Edition Indicator?
The FX Chaos Second Edition Indicator is a momentum indicator which provides trend and momentum indications using an oscillator. Not only does this indicator indicate trend and momentum direction, but it also indicates the strengthening and weakening of a trend through the color of its bars.
This indicator plots histogram bars which oscillate around zero.
Positive green bars indicate a strengthening bullish trend or momentum, while positive red bars indicate a weakening bullish trend or momentum. Inversely, Negative red bars indicate a strengthening bearing trend, while negative green bars indicate a weakening bearish trend.
How the FX Chaos Second Edition Indicator Works?
The FX Chaos Second Edition Indicator uses an algorithm which computes for the difference between a fast and slow Simple Moving Average (SMA) line. It also uses the median of each bar as a basis for its computation. The result is then plotted as histogram bars on the indicator window.
The color of the bars depends on whether the bar has a higher or lower value compared to the preceding bar. It plots green bars when the value is higher and red bars when the value is lower.
How to use the FX Chaos Second Edition Indicator for MT4
The FX Chaos Second Edition Indicator has no indicator settings where users can tweak its sensitivity. As such, its characteristics are already fixed. Traders can only modify the color and thickness of the bars within its Colors tab.
Traders can use it to identify trend direction bias based on whether the bars are generally positive or negative.
It can also be used to identify trend strength using the color of the bars.
Lastly, it can also be used as a trend or momentum reversal signal indicator based on the shifting of its bars from negative to positive or vice versa.
Buy Trade Setup
When to Enter?
Open a buy order on the confluence of a bullish trend reversal trade setup based on reversal patterns and trendline breaks and the shifting of the FX Chaos Second Edition bars to positive. Set the stop loss on the support below the entry candle.
When to Exit?
Close the trade as soon as price action shows signs of a bearish reversal.
Sell Trade Setup
When to Enter?
Open a sell order on the confluence of a bearish trend reversal trade setup based on reversal patterns and trendline breaks and the shifting of the FX Chaos Second Edition bars to negative. Set the stop loss on the resistance above the entry candle.
When to Exit?
Close the trade as soon as price action shows signs of a bullish reversal.
Conclusion
This indicator is very similar to the Awesome Oscillator. However, it does have subtle differences. It is more responsive to price movements compared to the AO making it suitable as a trend reversal confirmation signal.
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