Day and intraday traders face the greatest challenge in determining the right market trend. Traders can be distracted by market volatility and uncertain sentiments when assessing trends.
For identifying trend signals that are crossover-based, the Taotra indicator includes a set Linear Weighted moving averages (LWMA). This indicator uses 20 moving averages that have different parameters to plot crossovers. It also creates a colored cloud that acts as dynamic support/resistance levels around the chart. Taotra is a powerful tool that can be used to support horizontal S/R and Fibonacci.
The crossover’s combination of moving averages and color makes it more obvious to beginners who have difficulty understanding the trend signals. You can also use it with your existing MT4 trading strategy to improve your decision-making ability.
How can you determine stock and forex trend signals using the Taotra indicator in HTML4
Taotra indicator includes three types of linear-weighted moving averages. Crossover trend signals are generated when the fast MA (green), intersects with the slow MA (red). The mid MA acts as a dynamic trendline. The intention of Price to stay above or below the trendline gives you an advance idea about the direction of the market trend.
A bullish crossover is indicated by the green-colored MA flying above the red MA. Buy entries are recommended during an uptrend. This is when the price returns to the mid-MA levels. The area should be considered support. While you are still in a buy position, place the stop-loss limit lower than the red cloud. Consider a buy exit if the green cloud falls below the mid-MA level.
To sell orders, ensure that the green cloud is below the red cloud indicating a bearish crossover. During a downtrend, the price considers the moving average levels to be resistance. An ideal pattern for shorting is a solid bearish candlestick pattern which forms just below the dynamic resistance level. After activating a sell-order, you should consider holding your position until the fast MA moves above the mid MA. After the slow-MA moves, you may want to trail your stop-loss limit until the price reaches your target.
Conclusion
Taotra is a moving average-based trend indicator that has the highest signal consistency and accuracy. It is a great tool for beginners who are looking for clear and easy-to-use trend indicators. Advanced traders can also add it to their trading strategy to improve trading accuracy. Taotra can be customized to allow you to apply moving averages to your Metatrader chart.