Volatility Step Channel is a free Metatrader 4 trend-following Forex bands indicator that can be used for trade entries and exits.
The indicator appears in the main MT4 chart window as 3 colored lines: the middle band + 2 outer bands.
Tip: The Volatility Step Channel indicator can be used to scalp the currency market multiple times a day as follows:
- Open a buy scalper trade when the price reaches the lower dotted gray band and the Volatility Step Channel is sloping upwards.
- Open a sell scalper trade when the price reaches the upper dotted gray band and the Volatility Step Channel is sloping downwards.
- Aim for 5 – 15 pips profit per trade.
The indicator works equally well on all assets (Forex, CFD stocks, Indices, Cryptocurrencies, Commodities,..) and shows promising results if used correctly.
Free Download
Download the “volatility_step_channel.mq4” indicator for MT4
Indicator Chart (EUR/USD H1)
The example chart below shows the Volatility Step Channel mt4 indicator in action.
Tips:
Feel free to use your own favorite trade entry, stop loss and take profit strategy to trade when using the Volatility Step Channel Forex indicator.
As always, trade in agreement with the overall trend and practice on a demo account first until you fully understand this indicator.
Please note that even the best trading indicator cannot yield a 100% win rate over long periods.
Indicator Specifications & Inputs:
Trading Platform: Developed for Metatrader 4 (MT4)
Currency pairs: Works for any pair
Time frames: Works for any time frame
Trade Style: Works for scalping, day trading and swing trading
Input Parameters: Variable (fast period, slow period, mode, scale factor), color settings & style
Indicator type: Channel
Does the indicator repaint? No.
Volatility Step Channel + Forex Trend Filter AO Scalping Strategy for MT4
This scalping strategy combines the Volatility Step Channel Indicator for MT4 with the Forex Trend Filter AO Indicator for MT4.
It is designed for M1 and M5 charts to capture short-term market moves.
The Volatility Step Channel identifies potential price reversal zones with dotted gray bands, while the Trend Filter AO confirms the overall trend direction.
How This Strategy Works
The Volatility Step Channel shows upper and lower dotted gray bands.
A buy signal is generated when the price touches the lower band and the channel is sloping upwards.
A sell signal is generated when the price touches the upper band and the channel slopes downwards.
The Forex Trend Filter AO indicator confirms the trend: histogram bars above zero indicate a buy trend, and bars below zero indicate a sell trend.
Trades are taken only when both indicators align, improving accuracy and reducing false entries.
Buy Entry Rules
- Price reaches the lower dotted gray band, and the Volatility Step Channel slopes upwards.
- Confirm that the Forex Trend Filter AO histogram is above zero, indicating an uptrend.
- Enter a buy trade at the candle close where both conditions are met.
- Set a stop-loss slightly below the lower band.
- Set a take-profit of 8–15 pips on M1 or 15–25 pips on M5, or exit if the price touches the upper band or the AO histogram turns negative.
Sell Entry Rules
- Price reaches the upper dotted gray band, and the Volatility Step Channel slopes downwards.
- Confirm that the Forex Trend Filter AO histogram is below zero, indicating a downtrend.
- Enter a sell trade at the candle close where both conditions are met.
- Set a stop-loss slightly above the upper band.
- Set a take-profit of 8–15 pips on M1 or 15–25 pips on M5, or exit if the price touches the lower band or the AO histogram turns positive.
Advantages
- Combines reversal levels with trend confirmation for higher probability trades.
- Works well on very short-term charts for multiple intraday opportunities.
- Reduces the chance of trading against the trend.
- Flexible enough for both M1 and M5 scalping sessions.
Drawbacks
- Requires constant monitoring due to small profit targets and fast price movement.
- Multiple trades are needed to achieve significant gains because profit targets are small.
Case Study 1 – EUR/USD M1 Chart
During the London session, the price touched the lower Volatility Step Channel band with the channel sloping upwards.
The AO histogram was above zero.
A buy trade was entered at 1.1020 with a stop-loss at 1.1015.
Price quickly reached the take-profit target of 10 pips within 7 minutes.
Case Study 2 – USD/JPY M5 Chart
On USD/JPY, the price reached the upper band with the channel sloping downwards, while the AO histogram was below zero.
A sell trade was entered at 144.20 with a stop-loss at 144.30.
The trade moved to a take-profit of 20 pips before the histogram showed a slight upward reversal.
Strategy Tips
- Use multiple timeframes to confirm trend direction before scalping on M1 or M5.
- Only enter trades when both the Volatility Step Channel and AO indicators align.
- Consider trailing stops or partial exits if momentum starts fading before reaching the take-profit.
- Maintain a trading log to analyze performance and refine entries over time.
This strategy combines reversal detection from the Volatility Step Channel with trend confirmation from the Forex Trend Filter AO to generate high-probability scalping trades.
Applying proper risk management and disciplined execution allows traders to capture multiple short-term intraday moves efficiently.
Download Now
Download the “volatility_step_channel.mq4” indicator for Metatrader 4
