Its Histogram divergence indicator on MT4 automatically detects and shows divergence lines. The indicator uses the traditional MACD Moving Average Convergence and Divergence indicator to detect that divergence between price and MACD. Additionally the indicator plots divergence lines of bearish and bullish on the price chart and also the indicator window. Therefore, forex traders are able to quickly identify the most profitable places to enter and then Buy and sell according to the best entry points.
The indicator is compatible with all intraday charts as well as for long-term charts such as weekly, daily or monthly chart. New and experienced forex traders can employ it to make trades in the divergence. Divergence trading involves reversal trading that is susceptible to fail. Therefore, experienced forex traders must use technical analysis, including price action to verify the price reversals prior to making their entry into the market.
Histogram Divergence Indicator For MT4 Trading Signals
Divergence trading is about identifying potential divergence points. An actual divergence is recognized when the price and indicators’ values are in opposing directions. The indicator will draw trends across the price graph as well as an indicator after a divergence is discovered.
If the indicator shows the line under the price, this indicates an upcoming reverse in the bullish trend. Thus, forex traders must start into a buy position by placing a stop loss that is below the previous low of swing. The indicator does not offer an income target, so traders must book profits using an appropriate risk-reward ratio.
Every type of price reversal are susceptible to failure and could provide several incorrect entry signal. Since the indicator could detect the divergence in the beginning. But, there could be market participants remaining on the market to take advantage to the trend currently in place. This could lead to the price moving in the direction of trend before the actual price reverse.
Divergences in the vicinity of strong resistance and support channels, lines and trendlines give the most effective results. Furthermore, the use of divergence trading with different technical indicators, such as the RSI — Relative Strength Index indicator can give the most effective results.
In addition, the presence of divergence in price charts with longer time frames charts can provide longer-term price fluctuations and is more profitable. However, the quantity of trading signals could be less. On the other hand divergence signals for trading in smaller time frames happen frequently. Therefore, this MetaTrader indicator is appropriate for all types of traders such as intraday traders, scalpers as well as trend trader.
Conclusion
Histogram Divergence Indicator on MT4 is an important trading tool for traders of forex that are focused on trading in divergence. But, traders must confirm the price reversal once they have identified the divergence.
