Introduction to the Moving Averages Color Indicator
Most traders are often concerned with trend direction. However, another important factor when trading with the trend is trend strength.
The Moving Averages Color indicator is a simple technical indicator which allows traders to observe how strong a trend is.
What is the Moving Averages Color Indicator?
The Moving Averages Color indicator is a trend following technical indicator which is a customized moving average line.
This indicator plots a moving average line which changes color depending on the direction of the trend. It plots a lime line indicating a bullish trend, and a dark pink line indicating a bearish trend. However, unlike most moving average lines that change color, it does not change color in a binary manner. Instead, it changes color in gradients depending on the strength of the trend.
How the Moving Averages Color Indicator Works?
The Moving Averages Color indicator plots a basic moving average line. This moving average line can be modified just as with the built-in Moving Average indicator on the MT5 platform.
It then modifies the color of the line based on the slope of the moving average line. It plots a color gradient closer to lime whenever the moving average line slopes up steeply. It also plots a color closer to a dark pink gradient whenever the moving average line slopes down steeply. To do this, it uses an angle threshold to trigger the incremental change of the color of the line.
How to use the Moving Averages Color Indicator for MT5
The Moving Averages Color has a section within its settings which is similar to the regular Moving Average indicator settings.
“Moving Average Period (length)” allows traders to change the number of periods used on the moving average line.
“Applied Price” pertains to the price point used from a bar when computing for the moving average.
“Moving Average Method” pertains to the type of moving average line used.
It also allows traders to change the colors used on the moving average line on the “Fast Up Color” and “Fast Down Color”.
The “Angle Threshold for Color Steps” pertains to the sensitivity of the incremental change in color.
The Moving Averages Color indicator can be used as a regular moving average line. It can be used as a trend direction filter, or as a dynamic support or resistance level.
It can also be used as a trend strength indicator based on the color of the line.
Buy Trade Setup
When to Enter?
The Moving Averages Color line should have a color gradient which is close to lime. Open a buy order as soon as price action shows signs of a strong bullish trend continuation. 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 and the color of the moving average line starts to change.
Sell Trade Setup
When to Enter?
The Moving Averages Color line should have a color gradient which is close to dark pink. Open a sell order as soon as price action shows signs of a strong bearish trend continuation. 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 and the color of the moving average line starts to change.
Conclusion
This indicator is best used a trend strength indicator since its color changes allow traders to identify how strong a trend is.
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Moving Averages Color Indicator for MT5
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