Introduction to the SSL Indicator
Trending markets often present excellent trading opportunities. It allows for relatively accurate trades when trading with the trend, and it also has the potential to produce trades with high yields.
As such, traders often use trend following indicators to help them identify such trading opportunities.
What is the SSL Indicator?
The SSL Indicator is a custom trend following technical indicator which is based on the concept of the crossover of moving averages and price action.
This indicator plots dashed lines and dots to indicate trend direction. It plots a blue dashed line to indicate a bullish trend, and a red dashed line to indicate a bearish trend. It also plots a blue dot to indicate a bullish trend reversal, and a red dot to indicate a bearish trend reversal.
How the SSL Indicator Works?
As mentioned above, the SSL Indicator is based on the crossing over of price action and a moving average line. The SSL indicator uses a Linear Weighted Moving Average (LWMA) line. It also uses a modified price source, which could either be a Median Price or a Typical Price.
The SSL Indicator plots a line based on its underlying LWMA line, which is shifted in the opposite direction of the current trend. It detects a trend reversal whenever price closes against the direction of the trend beyond the dashed SSL line. It also plots a dot indicating the trend reversal.
How to use the SSL Indicator for MT5
The SSL Indicator has a “Moving Averages Period” variable within its settings. This allows traders to modify the period used on the moving average, tweaking it to become smoother or more responsive.
The “NRTR” option causes the indicator to run its algorithm only on candle close. This causes the indicator to be a non-repainting indicator.
“Horizontal Shift of the Indicator in Bars” allows traders to shift the SSL line forward or back.
The SSL Indicator can be used as a trend direction filter, wherein traders would trade only in the direction indicated by the SSL line.
It can also be used as a trend reversal entry trigger, wherein trades are taken as the SSL indicator plots a dot indicating a short-term trend reversal. However, this is best done in confluence with the main trend direction.
Buy Trade Setup
When to Enter?
Identify an uptrend based on a consistent blue dashed SSL line. Wait for price to retrace near the SSL line. Open a buy order as soon as price action starts to show signs of rejection of the SSL line. 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?
Identify a downtrend based on a consistent red dashed SSL line. Wait for price to retrace near the SSL line. Open a sell order as soon as price action starts to show signs of rejection of the SSL line. 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
The SSL Indicator is a very reliable trend following technical indicator. It can accurately detect trends and trend reversals when used in the right market context, which is a trending market or a trend reversal market scenario.
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