What Is The Bollinger Bands Squeeze Indicator on MT4?
The Bollinger Bands Squeeze Indicator for MT4 is a Bollinger Bands-inspired indicator. It was created especially to detect market times in which the Bollinger bands were compressed.
When the Bollinger Bands compress, it's usually a warning that price activity is compressing and prepared for a significant move.
Traders that take the time to study how this indicator works and apply it to their trade can substantially enhance their results. The following are some of the advantages of using the Bollinger Bands Squeeze Indicator for MT4.
Pros and Cons Of Using The Bollinger Bands Squeeze Indicator In MT4
Visual Signals
The Bollinger Bands Squeeze Indicator for MT4 allows traders to visually recognize times when the price of a trading asset or currency pairs is resting and may be preparing for a large move in one direction.
However…
The Bollinger Bands Squeeze Indicator for MT4 usually does not show traders the direction in which the price will likely breakout, but it does show them when a breakout is imminent and when a large move is most likely to occur.
On The Brightside
This means that a trader who uses the indicator can easily identify periods before very large market moves simply by watching the indicator's signals, as just before most big price moves, there is usually a brief period when the price trades in a very tight range, which can get even tighter or it can't before the price breakouts in a direction with very strong waves.
In general, the tighter the range, the more likely the move will be larger. The Bollinger Bands Squeeze Indicator For MT4 builds on the Bollinger Bands' natural response to such periods by shrinking both of their bands together to help the trader using it identify when such periods occur by creating a color scheme so that they can also see a visual alert in addition to spotting the Bollinger Bands contract.
This visual alert indicates that compression is occurring at that specific point, which is really beneficial to the trader.
Entry Signals
Another advantage of using the Bollinger Bands Squeeze Indicator for MT4 is that it helps traders develop entry signals, which can help them get on a trend that is just starting to form.
This means that because the indicator can generally predict when a large price change is about to occur and alert the trader prior to the breakout, the trader can profit from such occasions by taking trades from such breakouts.
However, doing this has its own risks. Since the price can move in either direction, if you place all your trades in the wrong place, your portfolio could take a significant hit.
Bollinger Bands Squeeze Indicator for MT4: How To Make a Profit From Such a Situation
In order to profit from the situation, the trader would most likely need to analyze several trendlines to mark out the price's highest and lowest points over the range period.
After the trader has marked the high and low, the next stage is to build a position size that complies with very strict money management criteria. Even if the breakout is false, the trader may simply enter in the opposing direction without jeopardizing his account balance.
This is critical because the trader's primary goal is to protect their initial trading capital. This could be a strategy to trade profitably with the Bollinger Bands Squeeze Indicator for MT4. According to a common recommendation, a trader should utilize no more than 1% to 2% of their whole trading capital for each trade.
The Bollinger Bands Squeeze Indicator For MT4 may also assist traders in staying on trend because it maps out the current direction in the trader's currency pair or trading asset of choice, as well as alerting the trader to where the current trend began and how many times it has halted on its path to rest.
This means that because the indicator compresses whenever the price of a currency pair or trading asset prepares for a new move, traders can use these compressions to pinpoint exactly where a price will move in a particular trading asset or currency pair and then correctly align all of their trades in the current trade direction until a new compression occurs to tell the trader the direction.
Bollinger Bands Squeeze Indicator for MT4: Opportunities For The Trader
These compressions, which are shown by the Bollinger Bands Squeeze Indicator for MT4, can also be used by a trader to extract profits from an existing position, especially if the position is already profitable. This can then educate a trader on the proper approach to take profits in the markets over time.
This means that because the price usually just moves in a new direction after price compressions, sometimes in the same direction as before and sometimes in the opposite direction, a trader with a position already in profit may not want to risk having a position already in profit break out against them, as price breakouts from such compression periods are usually comprised of very sharp moves and can quickly erode a trader's profits from an already profitable position.
As a result, the best thing to do is to use such new compression periods to either take the entire position out of the market if it is already profitable or to take out a significant portion of the position and wait to see if the price will likely continue in the direction it was moving before the compression.
Depending on the trader's risk appetite and whether the transaction is already open, the big position part that should be taken off in the second instance might be 2/3 or 3/4 of the initial position.
Conclusion
I hope this article has highlighted all the advantages and Disadvantages of The Bollinger Bands Squeeze Indicator on MT4. Use this indicator wisely, and you will most likely see positive results that will increase your portfolio's value.
Have you used this indicator in your trades? Leave a comment below.
We take a look at volatility indicators on mt4 including Bollinger bands here.
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