Any trading asset, timeframe not less than M15.
In this case, tick and real Forex volumes are considered the same, which in reality almost never occurs. We confirm signals by candlestick and technical patterns .
When MFI is applied in Forex as a complement to wave analysis, we look for the points where the pink bar of the indicator appears on the first wave and the Pin Bar and Doji candlestick patterns . If the volume indicator for MT4 shows divergences with the price, this strengthens the signal and gives an almost 100% probability of a quick trend change.
Market Facilitation Index indicator.
The higher the columns of the histogram of the volume indicator, the more players support the current trend, respectively, the decline confirms the growth of resistance and a high probability of a close reversal, a change in the balance between buyers / sellers and the appearance of divergences with the Volumes chart , which will be the main signal.
In other words, when activity falls, and MFI starts or continues to grow, the market is more speculative, which means that the risk of making a mistake with the direction of the transaction increases. In the opposite situation (a fall in MFI and an increase in the volume indicator), we can assume the injection of “smart money” with a subsequent reversal or breakdown of the side range.
Additionally, we look at the color of the histogram:
- Green (strong) . A long-term trend, there is a simultaneous increase in both volumes and activity. It is not recommended as an entry point, it is used only as an additional confirmation and for tracking positions.
- Brown (falling) . Profit fixation may start, but opposite positions are not opened yet. The volume tick indicator for MT4 does not provide confirmation of the end of the trend. Usually appears near the high of the second Elliott Wave .
- Blue (fake) . Major players stop increasing volumes supporting the trend: false impulses begin to “squeeze out” medium and small players. It is recommended only to observe and close current positions if there is a profit.
- Pink (sinking) . Despite the growth in activity, the trend has actually ended and a period of consolidation begins, which may end with either a reversal or a continuation of the previous movement.