Technical explanation of how the MT4 Trend Indicator works

trend indicator configuration

The TrendViper indicator is quite a straightforward tool, but it also features some advanced settings that require a bit more attention.

This article will try to reveal the workings of this trend indicator and hopefully make additional configuration easy to understand for everyone.

We will also explain how signals are generated by the indicator’s algorithm.

At it’s core, the TrendViper indicator is based on Moving Average CrossoversAverage Directional Index (ADX), and Additional Filters based on upper time frames.

50 SMA simple moving average

In the indicator’s default settings the green line represents a fast-moving average of 5 EMA (Exponential Moving Average). The red line represents a slow-moving average of 50 SMA (Simple Moving Average).

When the fast MA is above the slow MA the indicator will point to an Uptrend, which is marked in green on the Smart Display. When the fast MA is below the slow MA, the indicator will show a Downtrend, which is marked in red. 

Moving Average Crossovers

The arrows and the trading signals are automatically generated when the two (fast and slow) moving averages cross each other and when the specified ADX (Average Directional Index ) threshold is met.

Moving average crossover signals are good indicators of changing trends but they perform best when markets are trending, not when markets are consolidating and contracting. 

To maximize the winning potential of the moving average crossover strategy in adapting markets we added a few additional filters:

ADX Power filter

The main signal filter in the system is based on the Average Directional Index, ADX, which is used to quantify the strength and intensity of a trend.

Generally, it is accepted that when the ADX level is above the value of 25 there is a considerable price movement that points to the presence of a trend.

ADX treshold

The default ADX filter threshold for the arrows and the signals is set at 25(This can be modified in the settings. Some traders consider 22 or even 20 ADX to be a good enough value. Lowering the ADX threshold will result in more signals being generated by the system.)No signals will be generated if the ADX level is below the set threshold.

Trend Power ADX

On the Trend Power bar visible in the Smart Display all red bars represent values below 25. The first green bar is a value above 25.  The actual values of the ADX power bar visually represented in bars are as follows: 0-10 /11-15 / 16-19 / 20-23 / 24-25 / shown in red and 26-30 / 31-35 / 36-50 / 51-70 / 71-100 shown in green.Naturally, more green bars indicate higher ADX value which suggests a stronger trend.

Upper Time Frame filter

The setting Confirm on Next Upper Time frame can be used to filter the crossover signals by looking at the trend direction on the next upper time frame. The trend on the upper time frame is calculated using the exact same settings.

Confirm on upper time frame

By default, this option is turned off but you can quickly change it in the indicator settings by choosing option ‘True’. In some instances, confirmation of the trend on higher time frames can save you from potentially trading against a predominant trend.

When this option is turned on and you’re trading on the H1 chart and you get a UP (Buy) signal, then the trend on the upper time frame, in this case, H4, will also have to be bullish.

Upper time frame reference

In addition to the signals’ filter in the indicator settings, one can also reference the direction of the trend on 2 upper time frames by looking at the Smart Display. In the default, automatic setting the Smart Display will show the trend direction (according to the defined MA crossovers) on the next 2 upper time frames.

For example, if you’re trading on the H1 chart, the Display will show the trend direction on H4 and D1 charts. (In the indicator settings this can be set to a manual mode and any two time frames can be chosen by the user.)

MA Crossover filter

Alert condition

By default, the signals will be generated after MA crossover with a confirmed closed candle (On Bar Closed), but the alerts can be configured sooner.

For example Immediately after the MA crossover or with Minimum Distance in Points which can be defined in the next setting. The signals will still need to meet the set ADX threshold to be issued. The default option will generate slightly belated signals but most traders prefer each MA crossover signal to be confirmed with a candle close.

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