The Money Management Indicator is a simplified and elegant tool for Forex traders to effectively manage their money. It is based on the Average True Range (ATR), a crucial component in determining market movements.
Key Features of the Money Management Indicator
- The Money Management Indicator is designed to be simple and user-friendly for all traders.
- It uses the Average True Range to measure the average movement of a market over a specific trading period.
- The ATR is expressed in points (1 pip equals 10 points), making it easy for traders to understand and apply to their trades.
Exploring Strategies with the Money Management Indicator for MT4
The indicator presents three crucial figures, each displayed in its own box. The first value “ATR (14): 100 points” represents the take profit level and suggests placing the take profit 100 points, equivalent to 10 pips, from the opening price. The second value “Allow Lots per Trade (Risk 0.5%, SL 115 points)” represents the stop loss level, indicating the stop loss should be placed 115 points, equal to 11.5 pips, from the opening price. The third value “0.9” in teal color is the recommended lot size to use.
These three values play a significant role in any trade and determining the right lot size and stop loss/take profit levels can be challenging. Placing the stop loss too close may result in an early loss, while a take profit placed too close may miss out on potential profits.
The Money Management Indicator for MT4 simplifies the process by doing the calculations and providing these critical values for you to use, taking away the stress and guesswork involved.
Money Management Strategy
The Money Management Indicator For MT4 provides the necessary information to set up your order, but it does not specify whether you should execute a BUY or SELL order. To determine the type of order, you need to use a trend indicator that will signal the current market trend. Then, once you receive a signal from the trend indicator, you can use the information provided by the Money Management Indicator For MT4 to configure the trade accordingly.
In this guide, we will use the Moving Average as an example, but you can use any other trend indicator or a combination of indicators that align with your trading strategy.
To effectively utilize the Moving Average in identifying market trends, you must first grasp its interpretation. When the Moving Average line rises above the candlesticks or bars, it signifies a bearish trend. Conversely, if the line falls below the candlesticks/bars, it indicates a bullish trend.
Thus, the crucial factor to observe when using the Moving Average is the crossover between the indicator line and the candlesticks/bars.
With this understanding, we can proceed to the process of opening and closing orders.
- To open a BUY order using the combination of the Money Indicator For MT4 and moving average indicators, first look for when the moving averages line crosses below the candlesticks/bars.
- Once that is attained, now go ahead and open your BUY order using the values displayed by the Money Indicator For MT4.
- To execute a SELL order using the Money Indicator For MT4 and Moving Average indicators, first search for a crossover of the Moving Average line above the candlesticks/bars. After this has been identified, use the values displayed by the Money Indicator For MT4 to open the SELL order.
Money Management Indicator Pros & Cons
- Provide advance insight into the Risk to Reward ratio of your trade.
- It teaches traders about the importance of risk management.
- It Automatically calculates the risk and reward ratio of trades placed in the market.
- It didn’t directly provide a buy & Sell Signal.
- It is not for newbies as it requires basic understanding of the risk-reward management.
It’s crucial to understand that the Money Management Indicator For MT4 alone cannot accurately identify market trends. Hence, it must be combined with a trend indicator, this indicator is user-friendly, even for forex newbies, especially when the guide to interpret the values is followed, incorporating an indicator that detects overbought and oversold conditions may be beneficial for traders who want to trade after the trend indicator signals. Overall, this is a good money management tool but you need to develop a solid trading strategy to go with it.
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