Forex Distance Indicator

The Forex Distance Indicator uses the Moving Average Envelopes to draw bands on the chart. In this guide, we’ll talk about what the indicator is and its trading strategy.

What is the Forex Distance Indicator?

The Forex Distance Indicator uses a common MA trading tool; envelope. Moving Average Envelopes are percentage-based lines positioned above and below the price.

Each envelope is at the same percentage above or below the price, which creates channels or bands. The Forex Distance Indicator uses the same envelope principle to detect price movement.

Forex Distance Indicator
Forex Distance Indicator

Forex Distance Indicator Strategy

Forex Distance is an enveloped-based indicator, so you need to know a few things before trading with the indicator.

The envelopes capture the majority of price action. As a result, movements above or below the envelopes signify a strong move. A jump over the upper envelope indicates strong bullish momentum, while the dip below the lower envelope signals a strong bearish momentum.

To trade with the Forex Distance, you have to take note of these sharp movements, as they can signal a trend reversal. In other words, you can consider them as overbought and oversold levels. The extreme dip can be considered an oversold level, while the extreme high can be considered an overbought level.

Generally, if the price goes above the lower envelope, you can take a long position, while if it goes below the upper envelope, you can go short.

If the price is consolidated, it moves between the upper and lower envelopes. At this point, it’s better to avoid taking positions.

You can also include momentum oscillators like the RSI or MACD along with the Forex Distance. These oscillators are highly recommended when creating a strategy with any envelope-based indicator.

The good thing is you can use Forex Distance Indicator on all timeframes. However, using it on longer timeframes is best to avoid any false signals.

Buy Signal

  • The price must go above the lower envelope.
  • Wait for the trend to form and then enter fully.
  • You could place a stop-loss at the recent low.
  • You could set take-profit at the recent high, or exit the trade when the price breaks above the upper envelope.
Forex Distance Indicator buy signal
Forex Distance Indicator buy signal

Sell Signal

  • The price must go below the upper envelope.
  • Wait for the trend to form and then enter fully.
  • You could place a stop-loss at the recent high.
  • You could set take-profit at the recent low, or exit the trade when the price breaks below the lower envelope.
Forex Distance Indicator sell signal
Forex Distance Indicator sell signal

Forex Distance Indicator Pros & Cons

Here are the pros and cons of trading with the indicator.

Pros

  • The indicator can signal trend continuation and reversal.
  • It can be used in multiple strategies.
  • It works on all timeframes.

Cons

  • The indicator only takes historical data into account.
  • The price can break below or above the envelopes.

Conclusion

The Forex Distance Indicator uses MA envelopes as a trend-following indicator and can detect overbought and oversold levels. The indicator works as a trend continuation and reversal indicator.

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