CHAOS indicator for determining the entry points into the market.
This is a technical tool
analysis can become the basis of a profitable trading strategy. CHAOS indicator shows up well on all timeframes and
currency pairs. Its algorithm eliminates the influence of chaotic bursts
prices and assess the real market situation.
For setting an indicator in
the trading terminal should use standard rules. I’ve got the details.
described in the article “Metatrader 4 cheat sheet”.
In the chart the indicator will look like this:
How to use the CHAOS indicator in trading
This is a techanalysis tool
is displayed as bar graphs of different colors, zero level and
of a signal line with a yellow color.
Wherever we go
attention to where the histogram columns of the bar chart are in relation to the zero
lines. If there is an uptrend in the market above it, there is a downtrend below it.
To make a trading decision
is possible when crossing the histogram of level “0”. If this is happening in
bottom-up direction – buy, reverse direction – sell.
And now, about the colors
histograms. If the columns are colored blue, it means that the situation
in the market is stable. Price movement has a certain direction. If the color
the columns change to green, it indicates a possible reversal of the movement
prices. And the appearance of red colored bars is an uncertainty signal
in the marketplace. Most likely, the price will go sideways.
As well as that, the CHAOS indicator can be used to track divergence. If we see that the price of a trading instrument continues to grow, forming new local highs, and the tops of the signal line of the indicator decrease, it indicates a divergence. It signals that in the near future we can expect a reversal in the direction of price movement. It’s a great time to open a Sell position at the very beginning of a downtrend.
Other option is possible
of developments. The price of the currency pair forms new local lows. At the time of…
the signal line minimums decrease. You can expect a reversal in the direction of travel
prices from downward to upward. Consider opening a deal to buy.
of trade based on this indicator can be increased, if
add a signal filter. It could be any other indicator on your
Testing CHAOS in demo trading is a mandatory requirement. It is necessary to acquire skills to apply this tool and to develop positive statistics.