Introduction to the Target MA Indicator
“What comes up must come down.” This saying encapsulates one school of thought in trading which is that price would always revert back to its mean. This type of trading strategy is called a mean reversal strategy. Often times traders would assume price would be reversing back towards the average price which is the moving average.
The Target MA Indicator is built around this concept. It provides trade targets in a mean reversal scenario using popular moving average lines.
What is the Target MA Indicator?
The Target MA Indicator is a custom technical indicator which shows traders the target price assuming that price would reverse back towards the average price represented by a moving average line. Its targets are the widely used moving average lines, which are the 20, 50, 100, and 200-bar Simple Moving Average (SMA) lines.
This indicator provides a target which would be the closest moving average line which is not breached if price is assumed to be in a mean reversal scenario. So, its first target would be the 20 SMA line. If breached, then it would target the 50 SMA line next. If the 50 SMA line is also breached, then it would target the 100 SMA line next, then the 200 SMA line.
Although this indicator uses moving average lines as targets, it does not show the moving average lines with it. Traders can add the moving average lines manually.
How the Target MA Indicator Works?
The Target MA Indicator uses an algorithm which detects the direction of the momentum of price action. It then assumes that price would reverse towards the mean and display the closes moving average line in a mean reversal scenario as the next target. It also shows the latest level of the moving average line as the target price.
How to use the Target MA Indicator for MT4
The Target MA is preset to display Indonesian language. Traders can change the language to English by changing the “Indonesian” option within the indicator settings to false.
The “help” field is the exact instruction on how to use the indicator.
Traders can use this indicator from the 5-minute chart and up. The indicator would then display the target price based on the closest moving average line in a mean reversal scenario. Traders could then opt to open a trade in the direction of the target price.
Although this indicator is a mean reversal indicator, it can also be used to identify trend direction. Whenever the direction of the momentum does not coincide with a mean reversal scenario, the indicator would indicate that the market is in a trending condition as well as the direction of the trend. Traders could then opt to trade in the direction of the trend exclusively.
Conclusion
Although this indicator provides a target price, it does not provide an entry level. This makes it an incomplete trade signal. Traders can however use other technical analysis signals and setups to identify the proper entry and stop loss levels.
The alternative option which is to use it as a trend direction indicator is also a viable and effective way to use this indicator.
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