About the Price Reversal Signal Indicator
The Price Reversal Signal indicator for MT4 identifies short-term trend reversals, highlighting potential buy and sell opportunities directly on the chart.
It is particularly effective for scalping and intraday trading, allowing traders to capitalize on temporary shifts in price direction.
Green dots indicate a shift from bearish to bullish momentum, signaling a potential buy.
Red dots indicate a shift from bullish to bearish momentum, signaling a potential sell.
For higher accuracy, the indicator should be used alongside a longer-term trend filter, such as a 75-period exponential moving average.
Traders should align trades with the dominant market trend: take green dot signals in an uptrend and red dot signals in a downtrend.
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Download the “closing-price-reversal.mq4” MT4 indicator
Key Features
- Signals short-term price reversals with green and red dots.
- Helps identify buy and sell opportunities for intraday and scalping trades.
- Works best when combined with longer-term trend-following indicators.
Indicator Chart
The Price Reversal Signal indicator is shown below, marking potential trend reversal points with green and red dots.
These signals indicate moments where the short-term trend may change direction.
The chart demonstrates a green dot signaling a bullish reversal in an overall uptrend, and a red dot signaling a bearish reversal in an overall downtrend.
By observing these signals alongside a longer-term trend filter, traders can focus on high-probability entries and avoid trading against the main trend.
Guide to Trade with the Price Reversal Signal Indicator
Buy Rules
- Confirm the overall trend is upward using a trend filter like a 75-period EMA.
- Wait for a green price reversal dot to appear on the chart.
- Enter a buy trade at the close of the candle forming the green dot.
- Ignore green dots during a downtrend or near strong resistance.
Sell Rules
- Confirm the overall trend is downward using a trend filter like a 75-period EMA.
- Wait for a red price reversal dot to appear on the chart.
- Enter a sell trade at the close of the candle forming the red dot.
- Ignore red dots during an uptrend or near strong support.
Stop Loss
- For buy trades, place the stop loss below the swing low preceding the green dot.
- For sell trades, place the stop loss above the swing high preceding the red dot.
- Exit early if a reversal signal appears against your position.
Take Profit
- Close buy trades if a red price reversal dot appears.
- Close sell trades if a green price reversal dot appears.
- Optionally, use nearby support or resistance levels to secure profits.
- Consider partial profit-taking if momentum starts to weaken before the opposite signal.
Price Reversal Signal + Alligator MT4 Forex Strategy
This MT4 strategy combines the reversal-timing of the Price Reversal Signal Indicator with the trend-filter power of the Alligator Indicator.
The Price Reversal tool gives clear entry dots: green for potential buy reversals and red for potential sell reversals.
The Alligator helps identify the prevailing trend. When its lines are aligned and sloped in one direction, you know the market is trending.
By combining reversal signals with confirmed trend direction, you avoid entering reversals against an active trend.
This strategy works on M15 or H1 charts and is ideal for currency pairs with clear swings and decent volatility.
It is suitable for traders who prefer balanced entries: not pure scalping, but fairly quick trades with moderate targets.
Buy Entry Rules
- The Alligator lines must be aligned to show an uptrend (jaw, teeth and lips opening upward, price above the Alligator).
- A green dot (buy signal) appears from the Price Reversal Signal indicator.
- Enter a buy trade at the close of the candle with the green dot.
- Set stop loss a few pips below the recent swing low or below the Alligator’s nearest support (for instance, 25–35 pips depending on the pair’s volatility).
- Set take profit at a fixed moderate target or exit when the Alligator shows signs of flattening or reversal.
Sell Entry Rules
- The Alligator lines must be aligned to show a downtrend (jaw, teeth and lips opening downward, price below the Alligator).
- A red dot (sell signal) appears from the Price Reversal Signal indicator.
- Enter a sell trade at the close of the candle with the red dot.
- Set stop loss a few pips above the recent swing high or above Alligator’s nearest resistance (for instance, 25–35 pips depending on volatility).
- Set a fixed take profit or exit when the Alligator starts to flatten or reverse.
Advantages
- The trend filter from Alligator reduces false reversal trades taken against strong trends.
- The reversal signal gives relatively early entries before full retracements, increasing profit potential.
- The strategy balances trend trading and reversal timing.
- Suitable for medium-term intraday trades (not just quick scalps), giving room for moderate targets.
- Clear and straightforward rules make it easy to follow and backtest.
Drawbacks
- The reversal indicator may produce dots too early or during small retracements, causing false entries.
- Requires patience: you may need to wait for both trend confirmation and reversal signal, which reduces the frequency of trades.
Example Case Study 1 – EUR/JPY (H1 chart)
In the Asian-London session, EUR/JPY was trending downward: the Alligator lines were aligned downward and the price remained below the Alligator.
A red dot appeared from the Price Reversal Signal indicator at 158.42.
A sell order was placed at candle close at 158.42.
Stop loss was set at 158.80 (approximately 38 pips above).
Take profit target set at 157.92 (about 50 pips).
Over the next two hours price dropped smoothly and hit 157.92, closing the trade for about +50 pips.
During the move, the Alligator stayed aligned downward, confirming that the trend remained intact.
Example Case Study 2 – GBP/USD (M15 chart)
During the mid-morning London session, GBP/USD showed an uptrend: price above the Alligator and the Alligator lines opening upward.
A green dot appeared from the Price Reversal Signal at 1.2571.
A buy order was placed at 1.2571 at candle close.
Stop loss was put at 1.2535 (about 36 pips below).
Take profit target set at 1.2630 (about 59 pips).
Over the next 45 minutes price climbed and touched 1.2630, closing the trade with approximately +59 pips.
The Alligator remained aligned bullish during the entire trade and the price never crossed below it.
Strategy Tips
- Always wait for the Alligator to clearly show trend direction before acting on any reversal dot.
- Prefer pairs with good volatility and reasonable spreads and avoid exotic pairs where price action is erratic.
- Use this strategy during active session hours when price moves are more predictable (London, New York).
- Maintain a trading log to track which combinations of reversal dots and trend alignment produce the most consistent results.
Download Now
Download the “closing-price-reversal.mq4” Metatrader 4 indicator
FAQ
Can the Price Reversal Signal indicator be used alone?
While it generates reversal signals, it works best when paired with a longer-term trend filter.
This reduces false entries and ensures trades align with the dominant market direction.
How should trades be confirmed?
Confirmation can come from trend filters, moving averages, or price action patterns.
This helps ensure trades follow the main market trend and avoid reversals during choppy conditions.
Summary
The Price Reversal Signal indicator highlights short-term trend reversals with green and red dots, making it easy to spot potential buy and sell opportunities.
By trading only in the direction of the overall trend, traders can increase the probability of successful entries.
It is ideal for scalping and intraday strategies, helping traders react quickly to market shifts.
Combined with a longer-term trend filter, the indicator provides clear signals, supports disciplined risk management, and improves trade timing.
