Purple Extreme Indicator
There are often situations in financial market when the market is “overbought” or, conversely, “oversold”. These situations occur at moments when buyers overwhelmed sellers for longer period of time and the price of underlying asset rose or, conversely, when seller were in majority in the market for some time and the price of underlying asset was dropping. It often happens thereafter that the other market participants are not willing to buy for such “expensive” prices (in case of overbought market) or, conversely, they are not willing to sell for such “cheap” prices (in case of oversold market). Thus, an immediate change in the direction of an underlying asset occurs and we can take advantage thereof.
Right this principle is the one we have based our new, unique Purple Extreme indicator on. Download it here.
It’s our pleasure to introduce you our completely new Purple Extreme indicator that looks for the above-mentioned extreme market situations in a form of strongly “oversold” or, conversely, strongly “overbought” market. The indicator itself is very simple to be grasped and for use. Thanks to the Purple Extreme indicator, you’ll gain great overview about the moments when market price is believed to reach its potential peak or bottom. If we can take advantage of these situations in trading, they could provide us with a potential of great profitable trades.
There often occurs situation in financial market when buyers overwhelm sellers (underlying asset price is rising markedly) or, conversely, when sellers overwhelm buyers (underlying asset price is decreasing markedly). Nevertheless, this situation does not last forever as sooner or later, the strong side of market participants tends to lose its strength and the price of underlying asset will probably bounce back to normal. However, this “normal” zone is displayed in white within our Purple Extreme indicator (white zone). Therefore, if the yellow line founds itself in the white zone, both sides of the market are in equilibrium (relatively). The green-blue color (or green-blue zone) means the “overbought” zone, while the red color (or red zone) means the “oversold” zone. So, let’s speak little more in detail about these zones…
This indicator consists of three different parts. If the yellow line is in the green-blue part of the indicator, there is a strongly rising trend in the market. At the same time, it could point to a potential trend reversal, so an initiation of dropping trend. However, such situation does not have to occur immediately. It’s always better to wait for confirmation when the yellow line leaves the overbought green-blue part and starts to drop. In such case, it’s possible to consider opening of a trade.
- White part of the indicator means a neutral zone when the side of buyers and sellers is relatively in equilibrium. Zero, intermittent line means the break-even point to determine the moment when the buyers are going to prevail (white zone above the zero line), or when the sellers are going to prevail (white zone below the zero line). Breaking above/below the zero line may be used, theoretically, as a signal for opening or closing any trade in case of an optional use of this indicator or as an additional filter for any other indicator.
- If the yellow line is found in the red part of indicator, there is a dropping trend in the market. At the same time, it may mean a potential trend reversal, so a start of a new rising trend. However, such situation does not have to occur immediately. It’s always better to wait for a confirmation when the yellow line leaves the oversold part and starts to move upwards. In such case, it’s possible to consider opening of a trade.
In the image above, there are points displayed in a form or black rings, when it’s potentially appropriate to open a trading position.
However, please remember, that the Purple Extreme indicator is not infallible. If the yellow line leaves the extreme zone (the green-blue and the red one), it does not always mean that the trend is changing! Especially, if this is a market that tends to experience frequent and long trends. Conversely, the Purple Extreme indicator is very appropriate to be applied to the major forex pairs that often change their direction of price movement, so none of the sides (buyers and sellers) can be that dominant here for a long time.
Of course, the Purple Extreme indicator may be used also in any other way that may be appropriate for your trading strategy. For example, it may be freely combined with other indicators or used as a filtering element for your trading strategy based on the Price-Action principle. So, there are no limits set in this case se and you can include the Purple Extreme indicator as another element into your trading arsenal.
How to set the Purple Extreme indicator
Purple Extreme indicator contains also some user settings you can change according to your will. Here is the list of them:
Extreme period = here, you will set the indicator’s period, so how many candles, going back to the history, the resulting value is going to be calculated form. Example: If there is a value of 20 set here, the Purple Extreme indicator will take the last 20 candles into account and evaluate the actual situation in the market according to this. The default and recommended setting is 20.
Oversold: Level = the indicator value may be found within a range from -100 to +100. The -100 value means an extremely oversold market while the +100 value means an extremely overbought market. Oversold Level shows the pre-set level of an oversold part. So, which value will be considered as a deviation from the normal. The default and recommended setting is -70.
Oversold: Color = color of the oversold zone. Default color is red.
Overbought: Level = the indicator value may be found within a range from -100 to +100. The -100 value means an extremely oversold market while the +100 value means an extremely overbought market. Overbought Level shows the pre-set level of an overbought part. So, which value will be considered as a deviation from the normal. The default and recommended setting is +70.
Overbought: Color = color of the overbought zone. Default color is green-blue.
How to put the Purple Extreme indicator into operation
- Turn on (run) our Purple Trading MT4 trading platform
- At the top, on the left side, click on the “File” and choose “Open Data Folder”
- Open the “MQL4” file and then, the “Indicators” file
- Insert the downloaded file (indicator) into the “Indicators” file
- Turn off and on (again) our Purple Trading MT4 trading platform
- Now, the Purple Extreme indicator is ready for use
Do you want to see how it works? You can see on your YouTube channel here.