One of the most important decisions to make in any financial market in XAUBOT Pro is when to enter and when to get out. Similarly, in the forex market, it is highly important to find out when the best time is to buy or go long, and also when the best time is to sell or go short.
How do you go about finding such important information? Well in the case of the forex market, you can rely on technical indicators that can give you these reliable entry and exit points. One of these technical indicators is known as the money flow index or IMF.
In this article we are going to take a look at the money flow limit feature of XauBot Pro expert advisor and we will also discuss how you can use this technical oscillator in order to find proper points for going long and short.
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XauBot Pro’s Money Flow Limit Parameter
When it is stated that the expert advisor XauBot Pro is intelligent it means that it has features that can provide you with smart capabilities that help you make the best decisions in the market. Of course these are given to users as choices that they can make and as options that they can opt in or out of.
One of these options is that parameter known as money flow limit. What does this parameter do exactly? Well, as the name suggests, this parameter is related to the technical indicator money flow index.
There are other similar parameters integrated into this expert advisor that let you manage the use of technical indicators. The way such parameters work is that they help you define thresholds and limits for them. And once these thresholds and limits are surpassed or hit, you will receive a notice or alarm in order to make your move as fast as possible according to the information obtained through the indicator.
In the case of the money flow limit, users can define upper and lower thresholds. In this way whenever these upper or lower thresholds are passed you will receive an alert. Of course the way you set the limit for this parameter is through a value that you define for it.
For instance, if you define the value for this parameter as 10, then in any case if the money flow index goes to its lower and upper limits within 10 values of its extreme, you will receive the alarm.
So here we know that you can receive alarms for the money flow index. But what can you do with that? In other words, what use does the money flow index have in the foreign exchange market?
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Is the Money Flow Index Applicable in Forex?
The money flow index or MFI is an indicator. Technical indicators are not specially developed for one market or the other as a usual practice. This means a technical indicator can be applied to various different markets. In other words, the MFI is a technical oscillator that has application in the forex market as well.
The way the money flow index works is that it takes into account two of the most important factors in the market, one of them being the price movements and the other being the trading volume recorded by the users or indeed traders.
The MFI will then use this information in order to analyze what is taking place in the market in terms of the activity of users. This means when it considers the price movements and also the trading volume registered, it can point out two important areas. One being the area where the market is overbought and the other is where the market is oversold.
This is extremely important information, because users can make serious moves based on them. What kind of move? We will discuss that in the next section.
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How Can the MFI Be Used in the Forex Market?
Now that we know what the money flow limit parameter in the XauBot Pro expert advisor is and also what information this technical indicator provides for users, it is time to find out how you can actually use this technical oscillator in the foreign exchange market.
It all depends on whether the information provided by the money flow index points to the market being overbought or oversold. Then based on that you can make different decisions.
But one of the routes you can choose with the money flow index is to consider it as an indication of saturation.
Market saturation refers to when the market is filled to the brim with whatever is taking place. So for instance if the long position is saturated by traders, it is highly likely that prices will reverse toward the bear territory. On the other hand, if the short positions are saturated, it is likely the prices will increase.
As such there are two approaches with regard to market saturation:
- If the indicator is above 80 or 90 then it means the market is highly overbought. When the market is highly overbought, it could mean that it is saturated with long positions and so it is highly likely the prices will begin to dwindle soon. As a result, it might be a good opportunity to begin to sell.
- On the other hand, if the MFI refers to a number below 20 or 10, then it means the market is severely oversold. When the market is oversold to this degree, it could mean that it is saturated with short positions. Therefore, it is a good indication that prices will pick up soon. So this is a good chance to begin buying the asset.
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Conclusion
In this article we took a detailed look at the money flow limit parameter of XauBot Pro and also what this technical indicator provides for users. More importantly we saw how this oscillator can be used as an indication of market saturation whereby users can make decisions with respect to long or short positions.
