Band Pass filter is a trading algorithm based on the calculations of the standard Bollinger Bands forex indicator with an additional filter. The indicator is a trend indicator, so its calculations are aimed at determining the current trend, namely its direction and strength. The indicator is presented in the lower window of the price chart as a histogram with a signal line that changes its color and direction depending on the current market conditions. Taking into account the values of the histogram, the trend is determined, and at the same time the trade that is opened during this period.
The Band Pass filter indicator can be used with any currency pairs on any timeframe. At the same time, the indicator can also be used in multi-timeframe trading mode.
There are several sections in the settings of the Band Pass filter indicator that are responsible for its general functioning. The Input parameters section is responsible for its technical work, the Colors section is used to change the visualization parameters, to add signal levels to the indicator window, the Levels section is used.
-Time frame to use - parameter for using the trading timeframe. The default value is current.
-Band pass period - indicator calculation period. The default value is 50.
-Price to use - the type of price to which the indicator calculations are applied. The default value is Median.
-Delta - deviation of indicator calculations. The default value is 0.1.
-Interpolate in multi time frame mode? - parameter for using the indicator in multi time frame mode. The default value is true.
To open a certain trade using the Band Pass filter indicator, it should be determined the current thread, namely its strength and direction. To do this, in turn, the color and direction of the histogram columns and its signal line are taken into account. If the current market trend is upward, long positions are opened, if the trend is downward, short positions. When the trend changes or weakens, in both cases, trades are closed.
Signal for Buy trades:
- The histogram of the indicator is colored with the growth value and rises above the 0 level along with the signal line.
Upon receipt of such conditions on a signal candle, a buy trade can be opened, due to the presence of an uptrend. At the moment of its weakening, namely, when the histogram color changes, the trade should be closed. Opening a new trade should be considered when the current trend changes.
Signal for Sell trades:
- At least three bars of the histogram have a color with a falling value and point downwards.
Upon receipt of a combination of such conditions on a signal candle, a sell trade can be opened. At this moment, a downtrend is determined in the market. At the moment of a change or weakening of the trend, that is, upon receipt of reverse conditions from the indicator, the current trade should be closed and a new one should be considered.
The Band Pass filter trading indicator is very effective due to the fact that its calculations are based on the use of a time-tested indicator. Although the indicator is very easy to use, practice on a demo account is recommended.