The most profitable form of Forex trading is trading on trend. Every forex trader wants to stay in line with the current trend of the market. However, if you decide to enter the market too late it can be risky and could lead to a trading halt.
Many traders prefer to wait for a pullback or retracement of the trend before committing to a trade. While this may seem to be the case, it is never easy to determine the magnitude of a retracement of a trend. Even using the Fibonacci retracement method, determining the exact retracement point is not easy. However, by using the retracement factor indicator, Forex traders can determine when a trend is about to resume.
The Basics
The Retracement Factor indicator on MT4 indicates to traders the conclusion of a trend retracement, it also indicates the continuation of the trend. This indicator allows traders to profit from trend pullbacks by using the most appropriate entry point into the market. This indicator allows traders to enter less risky trades with optimal timing and precision.
The chart below shows how the retracement factor indicator appears on the chart.
This indicator is suitable for traders who trade volatility and utilize weekly, daily, hourly or monthly frame time frames. The Retracement Factor indicator is not suitable for scalpers as they are prone to fudging their trades every time.
Traders must understand the structure and price behavior of the market before using this indicator. This indicator is not suitable for those who are new to the Forex market and unfamiliar with trading. To ensure best practice in using this indicator, combining the indicator with Fibonacci tools can provide good trading configurations.
How to utilize the factors to use the Retracement Indicator
Traders need to be aware of the implications in the Retracement Factor indicator. If the indicator is above 1.5, it indicates that it is time for retracement. It is coming to an end. Therefore, traders need to watch out for the possibility of trend continuation and the ideal entry point.
Conclusion
The Retracement Factor indicator can be used as an effective tool to determine the moment when the trend retracement is complete. It is a great tool to find an excellent entry point with high risk-reward. This indicator can give you the best results when paired with the Fibonacci tool.
For those who are new to the industry, it is recommended not to apply this indicator hastily. Also this indicator should only be utilized for hourly, daily, weekly and monthly time frames.
