The Chart indicator is a useful Forex trading tool, which displays the individual price graph in a new window, in the form of candlesticks. This tool can automatically set the candlestick body width, the output data format, and also to adjust the number of bars that will be displayed on the trader's screen.
To clarify the features of such an indicator, we need to study the very nature of the candlestick charts and find out, which advantages do they include, as well as why the traders choose the candle-type graphics so often.
Features of the indicator
Using the MT4 trading platform, you probably paid attention to the variety of tools presented as well as to the fact that all the charts and diagrams are divided into several types:
- Linear graphs. The price movement is displayed as a line. With this kind of chart, a trader can analyze the close prices;
- Bars. This type shows prices in the form of bars, which gives a trader some extra advantages. In this case, not only open and close prices are available for the analysis, but also points of highs, lows, and trading range;
- Candlestick charts. In fact, candlesticks represent an improved bars version. They demonstrate the dynamics of the market more conveniently, and we will consider their features below.
On the figure below, you can see what the Chart indicator window looks like, in this case, several graphs are displayed in the single window:
Candlestick indicators allow you to track the price movement dynamics more clearly, comparing with the linear charts. Many experts agree that this indicator type lets you accurately determine the traders' mood, which is also very important.
How does the indicator work
The advantages of the candles in front of linear charts include, first of all, the very structure of the candlestick, which makes it possible to display a lot of the parameters.
Each candle has a body, and the color determines the candle type - a bullish candle (white color), or a bearish one (black color). The candle body is located between the opening and closing moments. Shadows indicate highs and lows. In general, the candle denotes the range the price moved in, within a particular time. Accordingly, if the price closes closer to a minimum, it means that it's formed by sellers (a bear candle). In the opposite case, the price is driven by buyers (bullish candle).
Trading with the candle indicators
On the chart, you can find the candles with a wide range, or with a narrow one. Candles of a wide range indicate a high level of the market volatility, and candles of a narrow range, respectively, indicate a low trading interest.
If a bullish candle closes at the top of the range, this means that the buyers are most active now, and they eager to continue buying. In this case, the "bears" begin to raise the price. The point which the candle closes at, relating to the trading range, shows the winner of the bullish-bearish confrontation.
- Candles of a narrow range. The graph showing candles with a narrow range indicates the low market volatility. If you see the Chart consisting of narrow-ranged candles, then you should expect a trend reversal, which means it will be logical to open a position, to close it in the future, during the high volatility level;
- Candles of a wide range indicate a further price movement. If a lot of candles with a wide range appear on the Chart, it makes sense to talk about the presence of a trend, and, accordingly, to start trading in such a direction.
Setting the indicator
The Chart indicator includes many parameters. You can make your trading as comfortable as possible, just by adjusting these options.
This tool includes the ability to change the color of bull and bear candles, to modify the formulas for reverse calculating, as well as to adjust the candle's body thickness.
It's also possible to set the maximum amount of candles that will be displayed on the Chart, and to make rapid estimates of the percentage change, using a log-scale mapping. In this case, the formula Ln(x)*100 is used.
Many traders note the convenience and immense possibilities that candlesticks give. Linear graphics, due to their structure, are not able to implement all the candlestick functionality, and that's why the Chart indicator was developed. The Chart indicator mechanism allows not only to analyze the activity of bulls and bears in the market, successfully choosing the moments for making deals but also to track several price movements in a single window.
It is worth noting that the beginning traders should take the time to practice, and to learn the basic candlestick types, to make the trading most successful.