Levels are one of the most frequently used technical analysis tools. Strong levels allow you to...
Levels are one of the most frequently used technical analysis tools. Strong levels allow you to identify potential pivot points and levels to put stop losses.
Algorithms of trend and channel indicators are based on the mathematical calculation of key levels, making it possible to earn money on a level breakout and determine the corrective price movement.
Having read this article, you will get familiar with the original forex levels indicators and learn how to trade with key levels.
Overview of Forex levels Indicators
Levels trading is a group of strategies based on the combination of technical analysis with trader psychology. The psychology here means that most traders think to some extent in the same way.
They employ the most popular indicators and receive similar trading signals, set stop loss and take profit orders at the same levels (for example, at the local extreme levels), and so on.
The accumulation of stop-loss orders actually forms the critical levels at which the price stops, starts trading flat, or changes the trend direction.
Everyone has heard of trading using support and resistance levels, moving averages, Fibonacci levels, and other elements of technical analysis used in financial markets.
This article will briefly consider three original indicators that build levels according to a particular algorithm. You will also find links to download indicators for MT4 and MT5.
Price levels indicators and forex trading strategies based on levels.
The principle of trading strategies based on price levels suggests you build the levels and estimate their significance: The breakout of a weak level means the price movement should continue and reach the next key level.
The price pivot (rebound) from the strong level means the trend reversal. It is not reliable to build the levels manually along with the visible extremes, especially when the deviation of 3-5 pips is vital in terms of potential profit/loss.
The Rabbit indicator has many modifications, the tool has been many times upgraded according to traders’ comments.
The Rabbit is the author’s indicator that draws price levels calculated according to the algorithm based on Fibonacci ratios and daily price extremes.
SubLevels display sub-levels between primary levels. At first acquaintance, it is better to set the value False not to overload the chart with unnecessary lines.
Besides, the meaning of these sub-levels is not clear, as well as their purpose.
Yesterday displays the time shift. The default value "0" shows the levels of the current day, that is, plotted according to the current high/low. If the value is "1", the indicator shows the previous day’s levels, and so on.
You can also set the value "-1"; then, the indicator will show the forecast levels for the next day. However, it is not clear according to what parameters the projected levels are constructed.
Therefore, the values "0" and "1" are optimal, the rest of the levels will be outdated.
Levels mean the number of levels. The less is the number of levels, the more they are significant, as they are drawn according to the most recent extreme prices.
The rest of the parameters are auxiliary, including the size and color of the font, the color of the levels.
The chart clearly displays flat sections, price swings within narrow ranges limited by indicator levels. There are also clear price rebounds.
Another popular modification is the Rabbit TT indicator. It constructs the Fibo grid in the specified ratio, taking into account the High/Low of the chosen timeframe.
You can use the Rabbit TT to trade with the level breakout or price rebound strategies. You can also calculate the stop loss levels and pending orders with the Rabbit TT.
Listed below, there are a few trading strategies with the Rabbit and Rabbit TT indicators:
The pending order trading strategy is one of the most common. You define the main trend direction and put pending orders so that you will catch the local corrections from key levels, also holding the trades entered in the primary trend direction.
The indicator developer, (JonKatana), recommends trading the GBPUSD pair. Early in the morning, it is recommended to put reverse pending orders, buy/sell limit orders.
You set buy/sell stop orders (the level breakout strategy) at the more distant levels, with a take profit at the next level, and a stop loss is one level further.
Level breakout strategy. After the price breaks out the level drawn by the indicator, you need to make a pause. If the price goes back to the level and continues moving in the break-out direction, the level is true.
If following a reversal to the level, the market continues moving in its direction, the breakout is false, and you enter a trade in the reversal direction. (Continue reading with LiteFinance)
