Discussing the article: "MQL5 Wizard Techniques you should know (Part 75): Using Awesome Oscillator and the Envelopes"
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Check out the new article: MQL5 Wizard Techniques you should know (Part 75): Using Awesome Oscillator and the Envelopes.
The Awesome Oscillator by Bill Williams and the Envelopes Channel are a pairing that could be used complimentarily within an MQL5 Expert Advisor. We use the Awesome Oscillator for its ability to spot trends, while the envelopes channel is incorporated to define our support/resistance levels. In exploring this indicator pairing, we use the MQL5 wizard to build and test any potential these two may possess.
This envelope indicator is used when price touches the upper band indicating overbought conditions or when price comes into contact with the lower band, a mark of an oversold situation. The use of confirmation, especially in strongly trending markets, can be paramount as price may not ‘mean-revert’ but ride the band. Envelopes are dynamic, they expand in volatile markets and contract when markets cool down. They are often paired with other indicators such as RSI, or MACD, or volume indicators for signal validation, therefore our pairing with the AO is not really out of the ordinary.
Other possible synergies that can be developed from this combination are reduced lag when compared to trend signals. The envelope signals are always anticipating, unlike pure trend plays that rely on momentum cues. Besides enabling mean-reversion trades as already argued above, they not only thrive in range-bound choppy conditions, but they are good at exploiting momentum divergences in the form of reversal warnings at envelope boundaries.
Author: Stephen Njuki