Indicator “Candle Temperature” - Precise Levels For Scalping

Greetings, ladies and gentlemen, Forex traders!

As you know, the market is subject to the same physical laws as the rest of the world around us. “Cooling down”, the price ceases to form natural barriers, after which the quotation does not feel strong resistance when moving to either side. “Warming up”, the price forms a solid resistance, overcoming which is much more difficult.

Some time ago, there was an idea to create a special indicator on the basis of these preconditions that would display cold and hot price flows in real time. Especially for forextraderportal.com readers, we present the working concept of the indicator for displaying the “temperature” of a candle.

Characteristics of the indicator

Platform: MetaTrader4
Currency pairs: any
Timeframe: any, better M1
Trading time: European and American sessions
Type of indicator: tick volumes
Recommended brokers: Roboforex, XM, AMarkets

The main Idea

It’s not a secret that horizontal levels play an important role in the market analysis. Anyway, almost any trading system takes levels into account, even if the main signal is fed by a certain technical indicator or a fundamental component.

The indicator itself shows on the chart at which levels the largest tick volume was observed. In the preset spectra, yellow indicates the highest temperature. That is, the closer to the yellow color, the greater the significance of the tick volume at a specific price level.

The indicator is perfect for scalping strategies, where traditional “broad” levels are not so appropriate. A short-term key level can be formed during one candle. In this case, the repeated level confirmation only amplifies the signal.

By default, the tick volume is taken from the minute timeframe, but you can specify any other TF. Also, the indicator has several display settings for more convenient information perception.

Indicator settings

In general, the indicator does not require adjustment as such, since the calculation algorithm in the root is very simple. However, there are several parameters that can affect the visual display of temperature.

• MaxMinVolume_AllCandles - this parameter affects how the maximum volume is calculated. “True” - the maximum values of volumes are calculated on the basis of all candles (SumBars). Note that this parameter is only suitable for analyzing volumes on history because when a new bar appears, the old values will be recalculated. “False” - the maximum volume value is calculated based on a separate bar. Past indicator values are not redrawn;
• CandleShadow - temperature display only on candle shadows. Useful for analyzing the bounces off levels;
• CandleBody - temperature display only on candle bodies. Useful for analyzing breakdown levels;
• BullSpectrum – choosing the range of bull candles;
• BearSpectrum – choosing the range of bear candles (you can choose one range for candles of any type);
• DrawSize - candle cell size (in pips);
• VolumeTf - the initial timeframe for calculations. To obtain a more accurate result, it is desirable to leave the smallest TF possible (minute);
• SumBars - the number of candles to display on the chart.

Tips for use

In fact, you can determine for yourself how to interpret the signals sent by the indicator. The main thing is to understand the peculiarity of the analysis of tick volumes. With the help of the indicator, you can determine at what levels the trade was most active. Naturally, it won’t be possible to determine, how much currency was actually traded.

First of all, pay attention to the accumulation of volumes at specific price levels. The more repetitions, the stronger the level.

Also, try not to think out for yourself, focusing only on the yellow shade of the candle. Sometimes, the price moves evenly, resulting in no accumulation of volumes at a particular level.

The main advantage of the indicator is its universality and clear short-term signals. In fact, the signals can be used both to determine new levels and to confirm the breakdown of the old ones. In the example below, you can see how the price “warms up” for a while under the resistance level, after which it overcomes it without delays.

Conclusion

In conclusion, I would like to clarify one point: do not take the indicator values as an accurate signal to action. The indicator can become an excellent assistant in daily trading, specifically, to simplify the identification of key levels and, in particular, for scalping. Nevertheless, the entry into the transaction must be supported by other signals.

Download “Candle Temperature” indicator