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The Absolute Strength Averages trading indicator is a trading algorithm whose calculations are based on the use of the standard Forex Moving Averages indicator with additional indicators. Its calculations, like the standard version, are aimed at determining the current market trend, namely its strength and direction. The indicator is presented in the lower window of the price chart in the form of four lines: two signal lines and two main lines, which change their direction and location relative to each other depending on the current market conditions. Taking into account the indicator values, the current trend is determined, and at the same time the moment of opening a trade.
The Absolute Strength Averages indicator is suitable for use with any currency pairs on any timeframe.
Input parameters
The Absolute Strength Averages indicator settings consist of several sections. Thus, the Input Parameters section is responsible for its technical work, the Colors section is for general visualization, and to add signal levels to the indicator window, the Levels section is used.
-Calculation method - the type of indicator calculations to be used. The default value is Calculate absolute strength using RSI method.
-Calculation length - indicator calculation period. Default value is 14.
-Smoothing length - period of smoothing indicator calculations. The default value is 5.
-Signal smoothing length - value of the period of smoothing the signal line of the indicator. The default value is 5.
-Price - type of the price to which the indicator's calculations are applied. By default, it has the Close value.
-Averaging method - the type of smoothing applied to the indicator calculations. By default, it has the Smoothed MA value.
Indicator signals
The Absolute Strength Averages indicator is very easy to use due to its visualization. To open a certain trade, one should take into account only the current trend, which is determined taking into account the direction and intersection of its lines. If the current market trend is upward, long positions are opened, if the trend is downward, short positions are opened. When the trend direction changes in both cases, the trades are closed.
Signal for Buy trades:
- The lines of the indicator move in parallel, while the main and signal lines with a rise value are higher than the lines with a fall value.
Upon receipt of such conditions on a signal candle, a buy trade may be opened, due to the presence of an uptrend in the current market. The trade should be closed upon receipt of the opposite conditions from the indicator. At this moment, a trend change is possible, which will allow considering the opening of a new trade.
Signal for Sell trades:
- The lines of the indicator with a falling value are higher than the lines with a rising value, while all the lines are parallel.
A sell trade, due to the presence of a downtrend, can be opened immediately upon receipt of such conditions on a signal candle. At the moment of a trend change, that is, upon receipt of reverse conditions from the indicator, the current trade should be closed and a new one should be considered.
Conclusion
The Absolute Strength Averages indicator is very effective as its calculations are based on a time-tested indicator. The indicator is also easy to use, however, it is recommended to practice on a demo account before trading on a real deposit.
