Derivative Oscillator Indicator (MT4)

About the Derivative Oscillator Indicator

The Derivative Oscillator is a momentum-based indicator that highlights changes in the speed and direction of price moves.

Unlike raw oscillators, it smooths signals to make momentum turns and divergences easier to read while reducing false alarms.

This MT4 version includes configurable smoothing, divergence markers, and alerts so traders can catch early reversals and pullback entries.

It works on all timeframes but performs best when combined with a higher-timeframe trend filter.

Key Features

• Smooth derivative-based momentum oscillator
• Automatic bullish and bearish divergence markers
• Configurable smoothing and sensitivity
• Popup, email, and push alerts on crosses/divergences

Free Download

Download the “derivative-oscillator.mq4” indicator for MT4

Indicator Example Chart (EUR/USD H1)

The example chart below displays the Derivative Oscillator mt4 indicator in action.

How To Trade Using This Indicator

Buy & Sell rules

• For longs: wait for the oscillator to cross back above the zero level.
• For shorts: wait for the oscillator to cross back below the zero level.

Stop Loss & Take Profit

• Stop loss at recent swing low (longs) or swing high (shorts).
• Target 1:1.5 to 1:2 risk-reward. Scale out partial profit at the first target and trail the rest with ATR or EMA.

The Derivative Oscillator & Xmaster Formula MT4 Strategy

This strategy combines the Derivative Oscillator Indicator with the Xmaster Formula Indicator to create a comprehensive and reliable system for identifying high-probability trade setups.

It employs a dual-confirmation approach, utilizing the Xmaster Formula to determine the overall trend direction and the Derivative Oscillator to pinpoint precise entry points.

This synergy is potent because it filters out false signals that might be generated by either indicator alone.

The strategy is versatile and can be used on any currency pair, though it is best suited for time frames like M15 and M30 for scalping and day trading.

It can also be adapted for higher time frames for swing trading. Both new and experienced traders will find this system easy to follow due to its clear visual signals.

Buy Entry Rules

• The Xmaster Formula indicator shows a buy signal, typically an upward-pointing yellow arrow.
• The Derivative Oscillators’ yellow bars cross above the 0.00 level, indicating a shift in momentum to the upside.
• Stop Loss: Place it below the recent swing low, or below the point where the Xmaster Formula’s signal changed.
• Take Profit: Aim for a fixed profit target of 10-20 pips, or exit the trade when the Xmaster Formula signals a sell trade.

Sell Entry Rules

• The Xmaster Formula indicator shows a sell signal, typically a yellow downward-pointing arrow.
• The Derivative Oscillator’s yellow bars cross below the 0.00 level, indicating a shift in momentum to the downside.
• Stop Loss: Place it above the recent swing high, or above the point where the Xmaster Formula’s signal changed.
• Take Profit: Aim for a fixed profit target of 10-20 pips, or exit the trade when the Xmaster Formula’s signal turns bullish.

Advantages

• Enhanced Accuracy: By combining the trend-following nature of the Xmaster Formula with the momentum confirmation of the Derivative Oscillator, this strategy significantly reduces the chance of false signals.
• Visual Simplicity: Both indicators provide clear, easy-to-read signals. The arrows and color changes of the Xmaster Formula, combined with the zero-line crossover of the Derivative Oscillator, make this system intuitive for all traders.
• Adaptable: The strategy can be applied to various time frames and currency pairs. While effective for scalping, it can also be used on higher time frames for longer-term trades by adjusting the stop loss and take profit accordingly.

Drawbacks

• Not for All Markets: The system may struggle in ranging or low-volatility markets where clear trends are not present. It is most effective during volatile trading sessions.
• Lagging Signals: Both indicators can sometimes lag behind the price. This means that by the time a signal is confirmed, a portion of the move may have already occurred.

Case Studies

Case Study 1: Buy Trade

On an M15 chart for USD/JPY, the Xmaster Formula indicator’s dotted line turned green, and an upward arrow appeared.

Shortly after, the Derivative Oscillator’s histogram bars crossed above the 0.00 level.

A buy trade was executed, with a stop loss placed below the most recent swing low.

The price continued to move upwards, and the trade was closed for a quick profit of 15 pips when the price started to consolidate.

This case demonstrates the perfect confluence of trend and momentum for a successful entry.

Case Study 2: Sell Trade

Looking at a 30-minute chart for GBP/USD, the Xmaster Formula indicator’s dotted line turned red, and a downward arrow appeared.

Simultaneously, the Derivative Oscillator’s histogram crossed below the 0.00 level.

A sell trade was initiated, with the stop loss placed just above the recent swing high.

The price dropped significantly over the next hour. The trader chose to close the position when the Xmaster Formula’s dotted line began to flatten, securing a profitable exit.

This example shows how the strategy can capture a strong trending move.

Strategy Tips

• Market Hours: Use this strategy during the London and New York trading sessions. These are the periods with the highest liquidity and volatility, which are crucial for this system to work effectively.
• Risk Management: Never risk more than 1-2% of your total trading capital on a single trade. Adhere strictly to your stop loss to protect against unexpected reversals.
• Monitor News: Be aware of high-impact economic news events. These events can cause unpredictable price movements that may trigger false signals or lead to significant losses if you are not careful.

Download Now

Download the “derivative-oscillator.mq4” indicator for Metatrader 4

Indicator Specifications

FAQ

1. Which timeframe works best?

H1–D1 gives reliable swing signals. For intraday, use the M15–H1 charts, but confirm with a higher timeframe trend.

2. How to reduce false signals?

Use an EMA filter and only trade signals aligned with the trend. In ranges, focus on divergence setups.

3. Can I use fixed or dynamic targets?

Both work. Fixed RR (1:2) is simple; structure-based targets or ATR levels adapt better to volatility.

Summary

The Derivative Oscillator MT4 is designed to catch momentum shifts and divergence while reducing noise.

It works best when combined with a higher timeframe trend filter and sound risk management.

Use it to time entries, confirm strength, and improve trade accuracy.