#1 Range-bound trading (50 SMA angle)
Submitted by Edward Revy on December 17, 2009 - 17:40.
One of the methods to detect a range-bound market is by looking at the angle of the Moving average.
If, for example, our Moving average (MA) is rising fast - the angle of the MA line on the chart will get steeper and steeper.
Already at this early stage we can make a conclusion: if the angle of the Moving average is rising – the trend is getting stronger. If the angle is dropping – the trend is getting weaker.
If the angle of the moving average is insignificant, close to flat or is flat – we know that the market has entered its sideways mode.
Now lets have a look at 50 SMA (regardless the time frame) and its angle on the chart.
The direction in which moving average is going is not important. the angle at which it rises or falls is what interests us.
First of all, it is a visual guidance – when the Moving average lies horizontally, we know that the trend has paused or non-existent.
But, we don’t stop on just visual evaluation. There is already a tool to help us calculate the numbers/angles for better precision and further confirmation.
This is a custom MT4 indicator: MAAngle.mq4
It calculates the angle of the Moving average (MA) at any moment and displays it as a histogram. When MA goes completely flat – the indicator is yellow, other times it'll show whether MA is rising or falling and how fast it does so.
But that’s not all. You can change indicator settings, especially Angle Threshold to make histogram more (or less) sensitive to angle changes.
So, this will conclude our first method of detecting ranging markets.
I have many more ideas and methods to share. Stay tuned!