Candle Direction Indicator

The Candle Direction Indicator is a useful forex tool that indicates if the present candles in other time frames are bullish or bearish. It is extremely valuable for traders that employ multiple time frame (MTF) analysis. This forex indicator is seen in the main chart’s upper left corner. For each time frame, you will get information about the current trend momentum for the current candle.

What is the Candle Direction Indicator?

The Candle Trend Direction indicator for MT4 is a trend forecasting tool that works on many time frames. It shows trend direction from the 1-minute chart to the monthly chart. The Candle Direction Indicator is appropriate for all timeframes and currency pairs. The input tab allows you to change the default indicator settings. Feel free to play around with the settings and parameters to suit your needs.

Setting up the Candle Direction Indicator
Setting up the Candle Direction Indicator

Candle Direction Strategy

Candle Trend Direction, which is a trend-following indicator, can be utilized to corroborate trading signals generated by other trading systems or techniques as well as for trade entry and exit. To trade with the Candle Trend Direction indicator, you may want to use your preferred trade entry, stop loss, and take profit technique. As with any indicator, you may want to trade in accordance with the broader trend and practice on a demo account initially until you completely understand it.

Buy Signal

This could be your checklist for a buy trade:

  • When your strategy aligns with the information given by the Candle Direction Indicator for a BUY trade.

Once this event occurs:

  • You could open a buy position 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 based on your strategy’s exit plan.
  • For good risk management, I would only consider trades with a risk to reward ratio of at least 1:2.
Candle Direction Indicator Buy Setup
Candle Direction Indicator Buy Setup

Sell Signal

This could be your checklist for a sell trade:

  • When your strategy aligns with the information given by the Candle Direction Indicator for a SELL trade.

Once this event occurs:

  • You could open a sell position 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 based on your strategy’s exit plan.
  • For good risk management, I would only consider trades with a risk to reward ratio of at least 1:2.
Candle Direction Indicator Sell Setup
Candle Direction Indicator Sell Setup

Candle Direction Pros & Cons

Pros

  • The Candle Direction Indicator informs the trader what the direction of the prevailing trend is.
  • This indicator could be used as an additional analytic tool for traders who prefer to ride long trends.

Cons

  • The Candle Direction Indicator does not give sufficient information to execute trades.
  • This indicator may require the trader to have some knowledge of technical analysis in order to combine optimally.

Conclusion

The Candle Direction indicator may be worth including in your trading arsenal. A decent forex indicator will likely boost your chances of success. Nonetheless, keep in mind the importance of maintaining realistic expectations. It, like any other technical analysis tool, is not capable of generating 100% correct indications. As a result, this forex indicator occasionally generates erroneous signals. Its performance will be highly variable depending on market conditions. Feel free to build your own trading system around it.

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