Welcome to the next Stonehill Forex Indicator Study. This research represents an investigative look into how and why some indicators work and some don’t work as well.
New Versus Old
We are introducing indicators not included with the MT4 platform to find more efficient indicators which may yield superior results than older indicators better suited for different markets.
Our Next Indicator Choice is…
TopTrend, our next confirmation indicator choice. This indicator creates a visually clear signal by printing blue/red colors. The math behind this indicator uses a moving average of 20 periods (one of our favorites); however, it also utilizes a deviation of 2.0 to manage data a little differently than a simple moving average, creating its unique appearance.
Others have referenced support & resistance, reversals, and breakouts as functions of this indicator. Trying to determine (or guess) when price reverses or breaks out of a zone is not possible with any degree of certainty. We can only trade what we see, not what we predict. We are not wizards with insight to foretell what might happen in the future.
Unfortunately, we could not find any specific information regarding who and when this indicator was developed; however, with the prolific coding volume over the last few years, it naturally found its way onto various forums and sites. If you happen to know of this indicator’s origins, drop us a line, and we’ll add it to this blog and recognize the contributor.
A “confirmation indicator” falls into the category of indicators that serve as an initial checkpoint after the baseline indicator. It is also a “below chart” indicator, which helps keep your price chart free of distractions. These concepts are explained in great detail in the Stonehill Forex Advanced Course HERE.
Clear signals without confusion
Indicates when a new trend is starting
Can be used as an entry and exit signal
Easy to Identify
Below is a screenshot of what the indicator looks like on the daily time frame. Note that we’ve changed the color of the candles to white to remove any emotional bias and that only the indicator is prominent. We’ve also brightened up the “blue” and made the lines a little thicker to make it easier to see.
How We Use It
As a single line “color” indicator, a signal is generated when the line changes from red to blue for a long signal, and blue to red for a short signal. If you considered using this indicator as an exit signal, the change of color may suggest the trend is either ending or has paused before continuing up, going sideways, or reversing. Let’s review the highlighted marks on the picture below to understand what they mean.
Long = Blue signal line.
Short = Red signal line.
The settings include; Length (20), deviation (2.0), Money Risk (1), Signal (1), Line (1), NBars (1000), SoundON (True). The default settings are in parentheses. We’ll explain what each setting is in greater detail below.
Length: Similar to the “period” of a moving average, this setting determines the number of periods used for data collection.
Deviation: In Forex, “deviation” can mean more than one thing. For our purposes, deviation, with respect to an indicator, is the measurement of data between the observed data and the expected value of a variable. Simply stated, the higher the number, the farther the indicator will plot a line relative to the moving average; a smaller deviation will plot the indicator closer to the moving average.
Money Risk: We don’t use this function of the indicator as it assumes you will use it for determining where your stop loss is, based on the risk profile extrapolated from support and resistance. Leave this at its default value of 1.
Signal: This setting changes the appearance of the indicator – which is not really necessary. Leave it at the default value of 1.
Line: Same as Signal – leave it at the default value of 1.
NBars: The number of periods to plot on the chart. 500 bars is plenty for back testing, leave the default value.
SoundON: An alert function of the indicator, you can toggle this off, if you chose not to be audibly notified when the indicator generates a signal.
COMPREHENSIVE TESTING RESULTS ACROSS
CURRENCY PAIRS, BITCOIN, AND GOLD ARE IN
PROCESS AND WILL BE AVAILABLE WHEN THIS
INDICATOR IS HIGHLIGHTED ON THE NNFX CHANNEL
As we did with past indicator studies, we’ve made the TopTrend Indicator available for download on our site from the indicator library. We will keep adding better indicators with each study for your use, at no charge. When you’re ready to get it, click HERE.
More to Come
There’s a lot more to come. We are excited to provide more trading tips in the near future. Sign up on our contacts page or subscribe to our YouTube channel. Receive early notifications as we continue to publish helpful, relevant, and informative Forex related material to support your quest to become a better trader.
And, now you are aware of another indicator that many traders don’t know or use.
Our only goal is to make you a better trader.
BTW – Any information communicated by Stonehill Forex Limited is solely for educational purposes. The information contained within the courses and on the website neither constitutes investment advice nor a general recommendation on investments. It is not intended to be and should not be interpreted as investment advice or a general recommendation on investment. Any person who places trades, orders or makes other types of trades and investments etc. is responsible for their own investment decisions and does so at their own risk. It is recommended that any person taking investment decisions consults with an independent financial advisor. Stonehill Forex Limited training courses and blogs are for educational purposes only, not a financial advisory service, and does not give financial advice or make general recommendations on investment.