The Bow indicator identifies the trend’s strength by plotting multiple arrows. This guide will talk about how the indicator works and how you can apply it as a strategy.
What is the Bow Indicator?
The Bow indicator is a simple trend-following indicator that plots several arrows to identify the strength. There are four different color arrows, each illustrating trend’s direction differently.
- The magenta arrow shows a strong bullish momentum.
- The red arrow mentions bullish momentum.
- The green arrow tells bearish momentum.
- The aqua arrow illustrates a strong bearish momentum.
These arrows give you a better idea of where the trend is heading.
Bow Indicator Strategy
To trade with the indicator, you must look for the strong bullish and bearish momentum arrows (aqua and magenta). Although you can enter at the green/red arrows, it’s best to enter at aqua and magenta, as the trend is stronger.
If the magenta arrow appears, you can take long positions, while if the aqua arrow pops up, you can go short.
One thing to remember when trading with the indicator is that red and green arrows act as a trend-confirmation signal. For instance, if you see a red arrow in an uptrend, it’s a sign of uptrend continuation. Conversely, if you see a green arrow, then it’s a sign of a downtrend continuation.
It’s important to note that the indicator can repaint, so it’s better to wait and then enter after the completion of the next candle. If you have a red/green arrow after the aqua/magenta arrow, then it is likely that the trend will continue, and you can enter that candle.
The indicator may be prone to false signals, so it’s better to apply other indicators in conjunction with Bow to reduce false signals.
The indicator works on all timeframes. However, it’s best to apply it on longer timeframes.
Buy Signal
- The indicator should plot a magenta arrow.
- Wait for the current bar to complete, and then enter.
- You could place a stop-loss at the recent low.
- You could set take-profit at the previous high or exit the trade when the aqua or the green arrow appears.
Sell Signal
- The indicator should plot an aqua-colored arrow.
- Wait for the current bar to complete, and then enter.
- You could place a stop-loss at the recent high.
- You could set take-profit at the previous high or exit the trade when the magenta or the red arrow appears.
Bow Indicator Pros & Cons
The Bow indicator is not the Holy Grail. It has its weaknesses; let’s compare its pros and cons.
Pros
- The Bow is easy to understand.
- The indicator can present clear entry and exit points.
Cons
- The aqua and magenta arrows can surface in an uptrend and downtrend, which is confusing.
- It can repaint.
- The indicator is prone to false signals and must be used with other indicators.
Conclusion
The Bow uses multiple arrows to signal the trend’s momentum. These arrows act as trend confirmation and reversal. The drawback of using the indicator is it is confusing and can repaint. Therefore, you must add other indicators if you want to use the Bow in your strategies.
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