Buying Selling Pressure Indicator

The SM Buy Sell Pressure Indicator is a technical indicator used on MT4 charts to analyze market momentum. By drawing arrows in its oscillator window, it generates real-time overbought/oversold alerts and pinpoints buy/sell opportunities. The indicator’s ease of use and simple trading criteria suggest that it is appropriate for novices. Furthermore, the indicator works with all MetaTrader timeframes, and it is useful for scalpers and intraday traders looking for trend-following trading signals.

What is the Buying Selling Pressure Indicator?

The Buying Selling Pressure Indicator measures the volume differential between buy and sell transactions per bar. The imbalance is shown as a percentage. The buy, sell, and unbalance values can be accessed through the strategy builder or manually entered strategies. As previously stated, the buy/sell imbalance is expressed as a percentage, specifically the percentage by which the larger side is greater than the smaller side — for example, if the total number of buys (market long transactions) is 1200 and the total number of sells (market short transactions) is 1000, the indicator panel will display an imbalance value of 20 (1200 is 20% greater than 1000). If the opposite is true and sales outweigh purchases by the same amount, the value is -20. On each tick, the totals of the buy and sell sides are calculated. Each successive tick’s total is added to the previous one until a new bar is established. At the start of each new bar, the sums are reset to zero. This implies that at the end of each bar, every buy and sell transaction that occurred during that bar is totaled and displayed on the chart.

Setting up the Buying Selling Pressure Indicator
Setting up the Buying Selling Pressure Indicator

Buying Selling Pressure Strategy

The indicator employs a signal line that depicts the indicator’s value and is used to indicate overbought/oversold conditions. A number near 50 indicates an overbought market. In contrast, it falls to -50, indicating that the price has been oversold. If you see the rope coiling around the 0.00 level, consider the market to be shelved or in a neutral trend. In the oscillator window, there are two more horizontal lines drawn at +25/-25 levels. These lines represent the price’s general trend condition. For example, a signal curve increasing above 25 indicates a strong bullish trend. As a result, you may want to consider sustaining a long position until the indicator value falls below 25 or reaches the overbought level of 50.

The indicator forecasts future price swing locations by utilizing OB/OS signals. In a downtrending market, for example, the indicator at -50 indicates that the price is oversold. Furthermore, a blue arrow near the oversold line implies that the price is planning a positive reversal. For sell setups, you could look for a bearish reversal circumstance, especially in an overbought market. The signal line with a red arrow rebounding from 50 is appropriate for going short. If you have a sell order, you can choose to quit the trade if the signal line rises over the 25-level. You can also wait until the indicator value reaches -50, indicating an oversold market. The signal curve rotates around the zero-line when the market reaches a neutral trend state. In such a case, we could halt fresh entry and wait for further trend confirmations.

Buy Signal

The following could be your checklist for a buy trade:

  • When the signal curve rises above the -50 level.
  • When a blue arrow appears near the oversold line.

Once these two events occur:

  • You could open a buy position after the bullish crossover occurs and after you confirm your entry with bullish candlestick patterns.
  • You could set your stop loss just below the nearest swing low.
  • You could set your take profit at the nearest resistance zone, or you could exit trade when the indicator value drops below 25 or hits the overbought condition at 50.
  • For good risk management, I would only consider trades with a risk to reward ratio of at least 1:2.
Buying Selling Pressure Indicator Buy Setup
Buying Selling Pressure Indicator Buy Setup

Sell Signal

The following could be your checklist for a sell trade:

  • When the signal curve drops below the 50 level.
  • When a red arrow appears near the overbought line.

Once these two events occur:

  • You could open a sell position after the bearish crossover occurs and after you confirm your entry with bearish candlestick patterns.
  • You could set your stop loss just above the nearest swing high.
  • You could set your take profit at the nearest support zone, or you could exit trade when the indicator value rises above -25 or hits the oversold condition at -50.
  • For good risk management, I would only consider trades with a risk to reward ratio of at least 1:2.
Buying Selling Pressure Indicator Sell Setup
Buying Selling Pressure Indicator Sell Setup

Buying Selling Pressure Pros & Cons

Pros

  • The Buying Selling Pressure Indicator lets the trader know what the momentum of the market is so that they could open trades following the momentum.
  • This indicator shows possible overbought and oversold levels so that the traders could enter or exit trades accordingly.

Cons

  • The Buying Selling Pressure Indicator may not be suitable for a consolidating market.
  • Some extra knowledge of price action may be required when utilizing the indicator.
  • It may generate false and lagging signals sometimes.

Conclusion

The SM Buy Sell Pressure indicator may be able to complement your trend-following trading techniques.  It allows you to monitor the price momentum of your favorite forex currency pairs or equities. This indicator can also be used with moving averages, the relative strength index (RSI), and the stochastic oscillator.