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The Absolute Strength Indicator is a widely used tool among MetaTrader 5 indicators that helps identify the relative strength of buyers and sellers in the market.
It is particularly useful for traders who employtrend-based strategies, providing precise analysis of dominant trends and market strength assessment.
Unlike the RSI indicator, which presents an overall market strength, the Absolute Strength Indicator separately identifies the strength of buyers and sellers, offering a more detailed market analysis.
Absolute Strength Indicator Specifications
The table below summarizes the key details of the Absolute Strength Indicator:
| Category | Volatile - Oscillator - Strength |
| Platform | MetaTrader 5 |
| Skill Level | Intermediate |
| Indicator Type | Leading - Trend-Following |
| Timeframe | Multi-Timeframe |
| Trading Style | Intraday Trading |
| Market | Forex - Cryptocurrency - Stocks |
Indicator in a Bullish Trend
When the green line is above the red line, it indicates a bullish trend, confirming the dominance of buyers in the market.
In the chart below, theEUR/USD currency pair is shown in a 5-minute timeframe. Each time the green line breaks upward, the price increases, and traders can enter a buy position.
Indicator in a Bearish Trend
In the following bearish trend example, the GBP/USD currency pair is displayed in a 4-hour timeframe.
When the red line is above the green line, it signifies that sellers have gained control over the market. Traders, depending on their strategy and confirmation signals, can enter a sell position.
Indicator Settings
The image below displays the settings panel for the Absolute Strength Indicator:
- Mode: Strength calculation mode
- Period: Overall indicator calculation period
- Smoothing Period: Determines how frequently crossovers occur based on trend strength
- Signal Period: Moving average calculation period (dotted line)
- MA Method: Selection of calculation methodology
- Applied Price: Specifies which price type the indicator applies to
Conclusion
The Absolute Strength Indicator is one of the Currency Strength indicators MetaTrader 5. By plotting the green line for buyer strength and the red line for seller strength, it provides a clear view of market control and the relative dominance of buyers or sellers.
When the green line is above the red line, it indicates an uptrend and can be used as a buy signal. Conversely, when the red line is above the green line, a downtrend is dominant, providing a sell signal.
What is the difference between the Absolute Strength Indicator and the RSI?
Unlike the RSI, which presents overall market strength, the Absolute Strength Indicator separately analyzes the strength of buyers and sellers. This makes it easier for traders to determine which side has control at any given time.
How can traders use the Absolute Strength Indicator for trend analysis?
This indicator plots two separate lines to represent buyer and seller strength:
- If the green line is above the red line, it signals a bullish trend.
- If the red line is above the green line, it indicates a bearish trend.