Market Activity Index can be best used to spot the quite period of the market, which is also called sideways market or low volatile market in some text book. In practice, this quite period is followed by highly volatile period in cyclic manner. The indicator itself represents the alternating picture of the market movement in the quantitative form. This indicator can successfully spot the start of high volatile market period. As this technical indicator oscillates between fixed value 0.0 and 1.0, this indicators is suitable to build trading rules when combined together with other technical indicators. In spite of the fact that Market Activity Index often spot the turning point accurately, the Market Activity Index is not meant to predict the market direction from its design stage. Therefore, this indicator is best used as the supplementary tool to other technical indicators if your trading strategy requires knowing the market direction.

In trading it is important to make good decision but it is also important when to rest. Unlike ATR or Standard deviation indicator, Market Activity Index oscillate between 0.0 and 1.0. Therefore you could use this as your trading alarm. In our opinion, it is also more accurate than ADX in terms of filtering out quite market. Simply speaking, rest your trading when the Market Activity is pretty low like below 0.05 or below 0.10 since market will not move much during this time.

Market Activity Index to detect quite market

If your trading strategy requires to differentiate the volatile market from quite market, then Market Activity Index is probably the best tool for such a task.

In fact, Market activity index is comparable to Average True Range and Average Directional Movement Index. However, Market Activity Index is better than those because it gives a definite low volatility threshold at 0.05 or 0.10, which is identical to the statistical significance level. You can choose most of 0.05 or 0.10 for its threshold value.

Also Market Activity Index often spots the turning point quite successful after it hit the low Volatility market.

Here is the code line to call it from iCustom from your MetaTrader. Please use this code line for the references only because this may not work in the different testing environment.

input int     CalculationPeriod          = 20;          // Calculation Period
input int     AveragingPeriod            = 6;           // Averaging Period
input bool    UseWeightedAverage         = true;        // Use Weighted Average

input double  IndexCriticalLevel         = 0.05;        // Index Critical Level Value
input int     IndexCriticalLevelWidth    = 1;           // Index Critical Level Width
input color   IndexCriticalLevelColor    = clrBlue;     // Index Critical Level Color
input bool    UseSoundAlert              = false;       // Use Sound Alert
input bool    UseEmailAlert              = false;       // Use Email Alert
input bool    UsePushNotification        = false;       // Use Push Notification

double value = iCustom(symbol, PERIOD_H4, "\\Indicators\\Market\\Market Activity Index MT4 v3.1.ex4", true, CalculationPeriod, AveragingPeriod, UseWeightedAverage, IndexCriticalLevel, IndexCriticalLevelWidth, IndexCriticalLevelColor, UseSoundAlert, UseEmailAlert, UsePushNotification, 0, 1);

Here is the link for the market activity Index

https://www.mql5.com/en/market/product/16189

https://www.mql5.com/en/market/product/16223

Also visit our website for many other powerful trading system and tool.

http://algotrading-investment.com/