MT4 indicator (ZoneTrade_v2.4.mq4)

How to trade with ZoneTrade indicator


The ZoneTrade indicator is written based on the Bill Williams' trading approach, which he calls "trading in the zone".

ZoneTrade indicator helps to maximize/double/triple profits when the market goes your way, namely, when momentum, acceleration and price confirm that you have favorable conditions for trading. Armed with this information you can be more aggressive when trading in the "Zone".

On the chart below:
Green - a buy zone.
Red - a sell zone.
Gray - a neutral/transition zone.

The zone is green if both AC and AO are green.

The zone is red if both АС and АО are red.

The zone is gray if АС and АО colors are different.

(If you use candlestick charts, switch them to Bar charts, or even make candlesticks invisible by matching the color of the background).

A few tips from B.Williams
From Williams' book "New Trading Dimensions":

While trading aggressively in the Zone, you should know when to stop adding new positions. Keep in mind that the market by its nature is a series of up and down waves and it's unusual for it to have more than 6 or 8 bars of the same color.
Thus, B.Williams suggests to stop adding new positions after the 5th green bar of the same color (uptrend) and place a stop at the bottom of that 5th bar. Keep moving your stop with each new bar until you get stopped out.

Download Indicator: ZoneTrade.mq4

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Awesome Oscillator

Awesome Oscillator indicator
Awesome Oscillator shows the difference in between the 5 SMA and 34 SMA.
If to be precise, 5 SMA of midpoints is subtracted from 34 SMA of midpoints which allows to see the market momentum.

What's "awesome" about the Awesome Oscillator?
Unfortunately, besides the word "awesome" there isn't much to be impressed with. Forex markets proved to be too unstable for this indicator. On the other hand, if you're trading stocks, Awesome Oscillator will be more interesting to study, since, unlike with currencies, Stock markets sustain longer more stable trends.

Let's take a look at the Awesome Oscillator in action by simply comparing it to 5 and 34 SMA on the chart.

As you can see, the AO mirrors the up and down moves of the 5 SMA in relation to 34 SMA.
That's our momentum Up and momentum Down periods. When two SMAs finally cross, the AO also crosses its zero line.

That said, there are questions to be asked:

Does AO gives any additional information besides following the market & showing increase/decrease in momentum which we can be seen with naked eye? - we'd say No.

Is AO fast enough to send signals about the market changes and aid us with entries as well as exits? It's No again. Awesome Oscillator is slow and usually late with signals.

Practical use of Awesome Oscillator
General rules:

When AO is above zero - only Buy orders should be taken.
When AO is below zero - only Sell orders should be taken.

Buy signal:
The signal to Buy comes when AO histogram forms a series of 3 bars, where:
bar 1 - is red.
bar 2 - is red. (Defaults: bar 2 will always be lower than bar 1. No need to worry about the height comparison).
bar 3 is green. (Defaults: bar 3 will always be higher than bar 2. No need to monitor the height again).

Place a pending Buy order above the candlestick which corresponds to the first green bar on the AO histogram.

Sell signal:

Sell when AO is below zero and there is a series of 3 candles where:
candle 1 is green.
candle 2 is green.
candle 3 is red.

Place a pending Sell order below the candlestick which corresponds to the first red bar on the AO histogram.

There are 2 other rules for trading with Awesome Oscillator.
1. AO histogram divergence.
2. 4 consecutive bars (green or red) + zero line crossover.

See examples below:

Those two methods aren't used very often, but still have the right to exist and be studied.
(If you like to learn more about divergence, study examples of trading MACD divergence. MACD is the most common indicator for studying market divergence).

Combining AO with other indicators
There is a known approach of using Awesome Oscillator (AO) together with Acceleration Oscillator (AC).
The AO is used to determine the main trend while AC is used to find short-term overbought/oversold conditions in that trend.
However, if to look at this combination on practice, the AC does all the work, while AO, well, shows the trend and lags behind.

In the highlighted examples below when the AC changed color from red to green and vice verse - this was a signal to exit:

Another suggested method is to combine Awesome Oscillator with Alligator indicator and Fractals, where AO will suggest underlying trend, while a fractal formed above/below Alligator's teeth will invite for an entry. (See fractals page for details).

Awesome Oscillator formula
Awesome Oscillator = SMA (MEDIAN PRICE, 5) - SMA (MEDIAN PRICE, 34)

MEDIAN PRICE = (HIGH+LOW)/2

Where: SMA - Simple Moving Average

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Market Facilitation Index (MFI)

"The MFI is a measure of the market's willingness to move the price. I cannot overemphasize the value of this indicator. It is a more truthful measure of market action than any stochastic, RSI (Relative Strength Index) or other momentum indicator." Bill Williams

In his book "Trading Chaos" Bill Williams introduces a new method of combining price and volume in order to see the true market development. The key role belongs to unique indicator called the Market Facilitation Index (MFI).

BW MFI (Bill Williams Market Facilitation Index) uses a simple formula

and allows to evaluate the efficiency of the market price movement.

What does efficiency means here? An efficient market is seen as liquid and active market where all types of investors (long-term and short-term traders) are actively involved in buying & selling. Should the interest of one large group of investors vaporize, the volume drops and from that point efficiency of the market goes down as well.

How to interpret BW MFI

MFI can be used for all time frames from 5 minutes up to daily and weekly frames.

Current BW MFI has been coded for MetaTrader 4 platform, however, other trading platforms might also have this indicator among trading tools.

To call it on MT4 charts: Insert -> Indicators-> Bill Williams -> Market Facilitation Index

If not available, you can download the same indicator here:

BW MFI.mq4

and place it in your installed MT4 folder inside /Experts/Indicators.

With BW MFI we don’t analyze absolute values of the indicator (be it 0.0030 or 0.0055), but rather focus on changes of price at any single moment.

To ease the task of evaluating those changes, in MT4 we have MFI bars colored in 4 distinctive colors:

All that’s left to do is to know how to read and interpret different colors given by MFI indicator.

How to read BW MFI indicator colors

There are 4 possible combinations of MFI and Volume relationship, which are colored in BW MFI indicator with the following message to send:

Green MFI bar tells that the market is already on the move. Therefore, traders’ best immediate reaction should be to go with the market, whatever direction it is heading.

On such green day you would already want to have an open trade in the direction of the market move.

If there were any trades left open, make sure they are not going against the market, otherwise they risk to bring losses. A Green MFI signifies three things:

• there are more traders entering the market;

• those traders are biased in the direction the market is moving (the last price bar on the chart);

• the market picks up speed.

Brown MFI bar (called Fade) appears when market starts to fade – lose interest in advancing further. Often this can be observed at the end of a trend. Traders who used to actively participate in the market are no longer interested in establishing new positions at current price, which causes the market to fade (both volume and MFI decrease). Bill Williams brings as an example Elliott waves, where the fist Elliott wave in the sequence has a fade top - little action is happening, and the excitement of the market is dwindling. Yet, he says later, that boredom often precedes the beginning of a big move. "So the very time when the market is most boring is exactly the time when a good trader must be on guard for any sign that momentum is building" – says Bill Williams. Several brown bars in a row can perfectly illustrate the period where fading excitement is slowly building the base for a new market move.

Blue MFI bar (called Fake) has been given its name for a reason. When market makes a progressive move, but this move is not supported by the volume (for any reason), this provides a clue that there are probably no real interest in the move yet, while certain group of market participants is trying to control and manipulate the market to their advantage. This is the point when newbies can be easily scared out by sudden change in the dominant trend,which will cause them to close their existing trades and attempt to run with the new trend, which to their huge disappointment will be over as fast as it began, since it was not a real move backed up by volume, it was a "fake" move, controlled by a small but strong group of large market players.

Pink MFI bar (called Squat) appears at the end of each trend. Bill Williams calls it "the strongest potential money maker" of the 4 setups. The squat bar is marked by an increasing volume yet temporary stalling price movement. The key factor is: there are many participants entering the market, all of them are enthusiastic about selling & buying (volume rises), but before the battle between buyers and sellers finds a winner, the price movement stops – market sort of squats before leaping forward. The breakout is going to be either seen as a reversal,or a continuation of a current trend. Either way, it is a good starting point to get in at the beginning of a trend.

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Gator Oscillator by Bill Williams

Gator Oscillator helps to visualise the periods when Alligator Indicator lines widen or narrow down.

In order to add Alligator indicator to Metatrader 4 chart:
Go to the upper platform Menu:
-> Insert
-> Indicators
-> Bill Williams
-> Gator Oscillator.


How to trade with Gator Oscillator

The Gator Oscillator histogram above zero shows the absolute difference between blue and red lines of Alligator indicator, while histogram below zero shows the absolute difference between red and green lines.

There are green and red bars on the Gator Oscillator histograms.

A green bar appears when its value is higher than the value of the previous bar.

A red bars appears when its value is lower than the value of the previous bar.

Gator Oscillator helps to better visualize the upcoming changes in the trends: to know when Alligator sleeps, eats, fills out and is about to go to sleep.

Now let's see what Gator does

Gator Awakes

- when after sleeping one of the indicator bars is red and the other one is green (either above or below zero)

Gator Eats

- when both bars (above and below zero) are green.

Gator fills out

- when after eating one of the bars turn red.

Gator Sleeps

- when both bars are red.

By default, Gator oscillator is set with a slight shift forward when displaying oscillator bars.

When working with Gator ocillator in real time, there is no impact/difference, but if to aattemp visual backtesting, such shift would prohibit from making a real evaluation of Gator indicator performance. Therefore, it is recommended to set shift value to zero as shown on the screenshot below:

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Forex Fractals

Fractals - an indicator introduced by Bill Williams.
Simple and versatile, fractals can be used as a stand-alone indicator or in combination with other Forex indicators.

Bill Williams also gives us his approach to using fractals in trading, which we are going to highlight here as well. But before that, let’s touch

The basics of Fractals indicator

Fractals point tops and bottoms where market reverses.

In order for a fractal to form, there should be a series of 5 consecutive bars where the middle bar will be the highest preceded and followed by two lower neighboring bars on each side:

- a Buy fractal forms at the top of the price wave with the Highest High in the middle and two Lower highs on each side;

- a Sell fractal forms at the bottom of the price wave with the Lowest Low in the middle and two Higher Lows on each side;

Buy and Sell fractals may share price bars (e.g. use the same bars from the set of 5).

How to trade with Fractals

Fractals as breakout points

Since fractals highlight points at which price failed to hold and therefore reversed, it is logical that once price beats its old fractal, there is a new strength coming.

Setting a trade at the breakout point is an obvious and simplest application of the Fractals indicator.

Another way to describe it: fractals help to see the levels of Support and Resistance.

There are some S/R levels shown below:

Fractals as trend line connecting points

Fractals indicator makes it easy to identify and connect the most significant tops and bottoms needed to draw a trend line. Drawing trend lines using fractals could give some advantage to Forex traders since other market participants might also be using the same obvious price points for drawing trend lines.

Fractals as trend confirmation

In an uptrend we will witness that there are more up fractals broken than down fractals. In a downtrend there will be more down fractals broken. As trend (up or down) progresses a successive break and advance of new fractals will be seen. Should the break of the previous fractal fail, we get a first sign of price consolidation.

Fractals for trend consolidation

Failure to successfully advance past previous fractal puts price on a consolidation path. To avoid an immediate coiling price will attempt to break at the opposite fractal. Should this move also fail to bring results, traders should prepare for a ranging market period till a new successful breakout.

Fractals trading: Bill Williams' Chaos Theory

Fractals indicator is one of five indicators of Bill Williams’ trading system. According to his system, Fractals have to be filtered with the help of Alligator indicator.

Fractals should be traded the following way:

• If a Buy fractal is above the Alligator's teeth (red Alligator line) traders should place a pending Buy order few points above the high of the buy fractal;

• If a Sell fractal is below the Alligator's teeth traders should place a pending Sell Stop order few points below the low of the sell fractal.

• Don’t take any Buy positions if a fractal is formed below the Alligator's teeth.

• Don’t take any Sell positions if a fractal is formed above the Alligator's teeth.

Main rule above all rules when following Bill Williams' method: don't take any signals from other indicators (Gator indicator, Awesome Oscillator, MFI etc) until the first fractal (buy or sell) is formed outside the Alligator's teeth.

Such signaling fractals remain valid till a pending entry order is triggered or a new valid fractal is formed (a position will then be re-set according with the new fractal). Consecutive fractals going in the same direction that are formed after the first order if triggered can be used to add on to an open trade.

Download Indicator: Fractals Original.mq4

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Alligator indicator by Bill Williams

Alligator indicator consists of 3 Moving averages:

Alligator’s jaws (blue line) – 13-period Simple Moving Average built from (High+Low)/2, moved into the future by 8 bars;

Alligator’s teeth (red line) - 8-period Simple Moving Average built from (High+Low)/2, moved by 5 bars into the future;

Alligator’s lips (green line) - 5-period Simple Moving Average built from (High+Low)/2, moved by 3 bars into the future.

In order to add Alligator indicator to Metatrader 4 chart:
Go to Menu -> Insert -> Indicators -> Bill Williams -> Alligator.

How to trade with Alligator Indicator


Alligator indicator helps to determine the presence and absence of a trend as well as its direction.
For an uptrend to be true and valid 3 lines (Jaws, Teeth and Lips) of Alligator indicator must be laid out appropriate way: Jaws at the bottom (blue), then teeth (red), then lips (green) on top.
Opposite for downtrend: jaws on top (blue), teeth (red), then lips below (green).

If lines are intertwined or laid in the wrong order or are moving close together as one, it means that Alligator is sleeping with its mouth closed. Traders should not open new trades.

As Alligator sleeps it becomes hungry. The longer he sleeps the hungrier he becomes – the longer the market stays without a trend, the more vigorously it will break into a new trend.
When the trend starts, Alligator wakes up and opens it mouth (3 lines get into order and start to move apart) – this is the time to start trading with a trend.

When Alligator is full and happy, he closes his mouth and goes to sleep again – the 3 lines move closer together or intertwine again.

Elliott wave traders can use Alligator as a helping indicator to identify impulsive and corrective waves: when price trades outside Alligator’s mouth, the impulsive wave is forming, when price trades inside Alligator’s mouth, the corrective Elliott wave is forming.

Don't feed the Alligator when it sleeps!

Download Indicator: Alligator.mq4

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