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The True Range Momentum trading indicator is an algorithm based on a combination of two standard forex indicators ATR and a double MACD. That is, according to the ATR data, it is built according to the data of the MACD indicator. Then, according to the first MACD, another MACD is plotted. And thus, based on the general calculations, the True Range Momentum indicator is used to determine the current trend and trade in this period, while also being suitable for measuring the current market volatility. It is presented in the lower window a price chart in the form of two lines that change their direction, while intersecting with each other. Based on the current factors of these lines, the current market movement is determined and trades are opened.
The True Range Momentum indicator can be used to trade any currency pair on any timeframe.
Input parameters
The settings of the True Range Momentum indicator consist of five input parameters, each of which affects the technical operation of the indicator to a certain extent. At the same time, such a section as Colors is used to change the color scheme and thickness of its lines, and the Levels section is used to add signal levels to the indicator window.
- ATR Depth - parameter indicating the bar used instead of the previous one in the calculations. The default value is 5.
- Period ATR - value of the period of the ATR indicator. The default value is 50.
- Period second - the period of the indicator based on which the MACD indicator is built. The default value is 20.
- Period signal - indicator signal line period. The default value is 5.
- Moving average type - the type of moving average smoothing used by the MACD indicator. The default value is Simple.
- Signal moving average type - the type of moving average for the signal line. The default value is Simple.
Indicator signals
The concept of using the True Range Momentum indicator in practice is very simple, since its use does not differ from other similar indicators. To open a certain trade, the current market trend is determined first. To do this, one should take into account the direction and intersection of the indicator lines. If the indicator conditions characterize an upward trend, buy trades are opened, if there is a downtrend, sell trades. In both cases, trades are closed when opposite conditions are received.
Signal for Buy trades:
- The indicator lines intersect so that the main line is higher than the signal line. In this case, both lines move from bottom to top.
Upon receipt of such conditions, a long position may be opened on the signal bullish candle, due to the presence of an uptrend in the current market. Close the trades after the indicator lines cross again. At this moment, it should be prepared to change the current trend and open new trades.
Signal for Sell trades:
- Both lines of the indicator go from top to bottom and intersect so that the signal line is higher than the main one.
A sell trades can be opened immediately after receiving such conditions on a signal bearish candle. Such a trade should be closed upon receiving the opposite conditions, namely after the indicator lines cross again. At this moment, it should be prepared to change the current downtrend and open new positions.
Conclusion
The True Range Momentum indicator is a very effective trading algorithm that allows being aware of the necessary information about the current market. Moreover, the algorithm for using it is very simple, so it is perfect for beginners who can improve their skills through preliminary practice on a demo account.
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