It is always important for currency traders to understand the current market conditions, as this will enable them to know the best strategy that should be used.
The Volatility Bars Metatrader 4 Forex indicator tells us whether the market is volatile or quiet.
So, you can deploy the most profitable forex trading strategy or system, either for a volatile or quiet market.
See our example chart below with the Stochastic oscillator.
Basically, the indicator appears in the form of blue histogram bars.
When the market session is volatile, the blue indicator histogram bars tend to rise, while they are seen to decline during quieter market conditions.
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Download the “volatility-indicator-2.ex4” MT4 indicator
Indicator Chart (GBP/AUD M30)
The GBP/AUD M30 chart below displays the Volatility Bars + Stochastic Oscillator Metatrader 4 forex indicator in action.
Basic Trading Signals
- Buy Signal: Go long when the price has reached the bottom and the Volatility Bar histograms are in the upper end region, scanning for buying opportunities.
- Wait for the Stochastic indicator to hit the oversold region, and when the %K Line crosses above the %D Line buy.
- Sell Signal: Go short when the price has touched its high and the Volatility Indicator2 histograms are in the upper end region, scanning for selling opportunities.
- Wait for the Stochastic indicator to hit the overbought region, and when the %K Line crosses below the %D Line sell.
- Exit buy trade: Close all buy orders while a bullish trend is ongoing, the Volatility Indicator2 histograms are in the lower end region.
- Exit sell trade: Close all sell orders while a bearish trend is running, the Volatility Indicator2 histograms are in the lower end region.
Tips: The Volatility Bars indicator cannot be deployed as a standalone technical tool; hence, the reason we added the Stochastic indicator to its setup rules.
MT4 Volatility Bars + Tipu CCI Forex Day Trading Strategy
This strategy combines the Volatility Bars MT4 Indicator with the Tipu CCI MT4 Indicator.
The Volatility Bars help identify potential reversal points by highlighting when the price has reached the bottom or top, with histogram bars scanning the upper-end regions for buy or sell opportunities.
The Tipu CCI displays a histogram: blue bars above zero indicate a bullish trend, while red bars below zero indicate a bearish trend.
Combining price volatility with trend direction increases the probability of profitable day trades.
This approach is best applied to intraday charts such as M15, M30, or H1.
It is suitable for traders seeking high-probability entries aligned with both market momentum and trend direction.
By waiting for confirmation from stochastic crossings and trend direction, it filters out false signals and reduces the risk of entering trades during choppy markets.
Buy Entry Rules
- Price must have reached a short-term bottom, and Volatility Bar histograms should indicate scanning for buying opportunities.
- The Stochastic indicator must enter the oversold region, and the %K line must cross above the %D line.
- The Tipu CCI histogram must be blue, confirming bullish trend direction.
- Enter a long position at the close of the candle when all conditions align.
- Place a stop loss below the recent swing low of the timeframe used.
- Take profit when either:
- The stochastic %K line crosses below the %D line in overbought territory, or
- The Tipu CCI histogram turns red, signaling a weakening trend.
Sell Entry Rules
- Price must have touched a short-term high, and Volatility Bar histograms indicate scanning for selling opportunities.
- The Stochastic indicator must enter the overbought region, and the %K line must cross below the %D line.
- The Tipu CCI histogram must be red, confirming bearish trend direction.
- Enter a short position at the close of the candle when all conditions align.
- Place a stop loss above the recent swing high of the timeframe used.
- Take profit when either:
- The stochastic %K line crosses above the %D line in oversold territory, or
- The Tipu CCI histogram turns blue, signaling a weakening trend.
Advantages
- Combines price volatility with trend confirmation for more accurate entries.
- Filters trades using stochastic oversold/overbought conditions to catch momentum shifts.
- Provides clear exit signals based on trend reversal or stochastic crossovers.
- Works well on multiple intraday timeframes for frequent trading opportunities.
- Helps avoid entering trades during choppy market conditions by requiring the alignment of multiple indicators.
Drawbacks
- Requires monitoring both stochastic and Tipu CCI, which can be challenging for rapid price movements.
- In highly trending markets, stochastic signals may produce false retracement entries.
- Trading multiple conditions increases the potential to miss trades if signals do not align quickly.
- May require some adjustment for different currency pairs to optimize sensitivity.
Example Case Study 1
On the EUR/GBP M15 chart during the London session, the price reached a short-term bottom while Volatility Bars indicated scanning for buy opportunities.
The stochastic %K line crossed above %D in the oversold region, and the Tipu CCI histogram was blue.
A long position was entered at the close of that candle with a stop loss below the recent swing low.
Price moved upward over the next few candles, and the stochastic %K crossed below %D in overbought territory, triggering take profit and closing the trade successfully.
Example Case Study 2
On the USD/JPY H1 chart during New York hours, price touched a short-term high, Volatility Bars indicated a sell opportunity, and the stochastic %K crossed below %D in the overbought region.
The Tipu CCI histogram was red, confirming a bearish trend.
A short position was opened at the close of the candle with a stop loss above the recent swing high.
Price declined over the next hour, and the Tipu CCI histogram turned blue, signaling a weakening trend and triggering the exit.
The trade captured a strong intraday move with minimal retracement.
Strategy Tips
- Focus on active trading sessions like London and New York for clearer volatility patterns and trend alignment.
- Avoid trading during low liquidity periods, as stochastic signals may produce false entries.
- Consider adjusting stop loss distance based on the volatility of the currency pair being traded.
- Use a trade journal to track which pairs respond best to this strategy for consistent results.
- Combining this strategy with support and resistance levels can increase the probability of successful trades.
Download Now
Download the “volatility-indicator-2.ex4” Metatrader 4 indicator
MT4 Indicator Characteristics
Currency pairs: Any
Platform: Metatrader 4
Type: chart window indicator
Customization options: Variable (MaPeriod, value), width & Style.
Time frames: 1-Minute, 5-Minutes, 15-Minutes, 30-Minutes, 1-Hour, 4-Hours, 1-Day, 1-Week, 1-Month
Type: volatility
