The 5 Bar Reversal Signal MT4 forex indicator is a short-term trend reversal indicator that works well for scalping and intraday trading currency pairs.
A short-term bullish reversal signal occurs when the indicator paints a blue arrow (short-term bullish).
A short-term bearish reversal signal occurs when the indicator paints a red arrow (short-term bearish).
This technical tool can be used as a standalone indicator or in conjunction with other analysis tools or forex technical indicators.
For instance, use it together with Bollinger Bands or the 200 simple moving average and trade in the direction of the longer-term trend.
Use it on low spread currency pairs such as EUR/USD, GBP/USD, and USD/JPY.
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Download the “5-bar-reversal.ex4” MT4 indicator
Indicator Chart (EUR/USD H1)
The EUR/USD Hourly chart below displays the 5 Bar Reversal Signal Metatrader 4 Forex indicator in action.
Basic Trading Signals
Signals from the 5 Bar Reversal Signal MT4 forex indicator are easy to interpret and go as follows:
Buy Signal: Initiate a new buy trade when the 5 Bar Reversal Signal forex indicator paints a blue arrow on the activity chart.
Sell Signal: Initiate a new sell trade when the 5 Bar Reversal Signal forex indicator paints a red arrow on the activity chart.
Trade Exit: Close the open buy/sell trade when an opposite signal occurs, or use your own method of trade exit.
5 Bar Reversal + XTC Trend MT4 Scalping Strategy
This scalping strategy combines the 5 Bar Reversal Signal MT4 Forex Indicator and the XTC Forex Trend MT4 Indicator to capture short-term price movements.
The 5 Bar Reversal paints a blue arrow for potential bullish reversals and a red arrow for potential bearish reversals.
The XTC Trend shows blue bars for bullish trends and red bars for bearish trends.
By combining a reversal signal with trend confirmation, traders can filter out false signals and increase the probability of success.
This strategy is designed for M1 and M5 charts, making it ideal for scalpers who want to execute multiple quick trades per day on major currency pairs with tight spreads.
Buy Entry Rules
- Wait for the 5 Bar Reversal indicator to print a blue arrow (bullish reversal signal).
- Confirm that XTC Trend is showing blue bars (bullish trend) at the same time or just before the arrow appears.
- Enter a buy trade at the next candle open after confirmation.
- Set stop loss a few pips below the low of the reversal bar or recent swing low.
- Take profit when XTC Trend bars change from blue to red, a fixed small-pip target is reached (5–15 pips), or a short-term resistance level is touched.
Sell Entry Rules
- Wait for the 5 Bar Reversal indicator to print a red arrow (bearish reversal signal).
- Confirm that XTC Trend is showing red bars (bearish trend) at the same time or just before the arrow appears.
- Enter a sell trade at the next candle open after confirmation.
- Set stop loss a few pips above the high of the reversal bar or recent swing high.
- Take profit when XTC Trend bars change from red to blue, a fixed small-pip target is reached (5–15 pips), or a short-term support level is touched.
Advantages
- Combines a reversal signal with trend confirmation to reduce false entries.
- Works on M1 and M5 charts, allowing multiple trades per day.
- Tight stop-loss and small pip targets reduce risk.
- Effective on major currency pairs with high liquidity and low spreads.
Drawbacks
- High-frequency trades may accumulate spread and slippage costs.
- Noise on M1 and M5 charts can produce false reversal signals.
- Requires constant attention and fast execution.
- The trend indicator may lag slightly, leading to delayed confirmations.
Case Study 1: EUR/USD on M1
On the 1-minute EUR/USD chart, the 5 Bar Reversal indicator printed a blue arrow at 1.1012, signaling a potential bullish reversal.
At the same time, the XTC Trend showed blue bars confirming a bullish trend.
A buy trade was entered at 1.1013. The stop loss was set at 1.1008, just below the low of the reversal bar.
Price quickly moved up and reached 1.1023 within 10 minutes, giving a gain of 10 pips before the XTC Trend bars started turning red, signaling a trend weakening.
This shows how the strategy can capture fast, small moves on M1 charts.
Case Study 2: GBP/JPY on M5
On the 5-minute GBP/JPY chart, the 5 Bar Reversal indicator printed a red arrow at 160.25, indicating a bearish reversal.
Simultaneously, the XTC Trend showed red bars confirming a bearish trend.
A sell trade was opened at 160.23 with a stop loss at 160.40.
The price moved down to 160.00 over the next 20 minutes, capturing a profit of 23 pips before the trend bars turned blue, signaling a potential trend reversal.
Strategy Tips
- Wait for a small pullback toward the recent support/resistance level before entering after a reversal arrow to reduce the chance of a false signal.
- Focus on trading during the most volatile hours of the session to increase pip potential.
- Use alerts for reversal arrows to avoid constantly monitoring the chart and enter trades immediately when conditions are met.
- Adjust stop loss and take profit dynamically according to recent market volatility to avoid being stopped out prematurely.
- Trade only major currency pairs with tight spreads for more accurate and reliable signals.
- Combine with simple price action confirmations, such as bullish/bearish engulfing or pin bars, to increase trade accuracy.
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Download the “5-bar-reversal.ex4” Metatrader 4 indicator
MT4 Indicator Characteristics
Currency pairs: Any
Platform: Metatrader 4
Type: Chart pattern indicator
Customization options: Colors, width, & Style.
Time frames: 1-Minute, 5-Minutes, 15-Minutes, 30-Minutes, 1-Hour, 4-Hours, 1-Day, 1-Week, 1-Month
Type: Trend Reversal
