Within the last installments that we have made on trading training, we have been explaining since oscillator indicators, chart figures o tips to avoid making mistakes. You may have noticed that we have been talking a lot recently about how to make the most of the volatility of the markets Safely. Therefore, today we are going to continue with your trading training by explaining the secrets of the Mago Estraperlo indicator.
What is the Mago Estraperlo indicator?
The Mago Estraperlo indicator is a so-called “new era” indicator. This name of indicators is attributed to those indicators that are composed of different indicators. It was created by Alberto Aguilera, Xavier Garcia, Javier Alfayate and Miguel Ángel, great traders recognized in the world of technical analysis. It is a combination of 3 indicators that we will now mention and works with a clear interface. They measure the narrowing and widening of the bollinger bands. We recommend combining the use of the Black Magician with the Bollinger bands.
What indicators is the Black Magician composed of??
The indicator is made up of these 3 indicators:
1.Atlas
The Atlas indicator (represented by the blue bars) tells us when an asset is entering a range. This allows us to detect the moments prior to volatile movements to position ourselves. Within the indicator, the Atlas provides signals of accumulation (below zero) or expansion, that is, periods of volatility (above 0).
The Atlas helps us identify when an asset enters an accumulation zone and when expansion begins. Source: Tradingview.
2. Estraperlo (MACD with custom settings)
The MACD (one of the indicators that we already taught in another trading training article) measures the convergence or divergence of moving averages. The crossing of these averages can define whether the trend is bullish (green) or bearish (red) and whether it converges or diverges from the averages. It has a special configuration developed by Miguel Angel, which is already directly incorporated into the indicator (which we will show at the end of the article).
The Estraperlo allows us to identify the moments in which a trend can be reversed. Source: Tradingview.
3. Climate candles
Initially, Blai introduced the Average Proportional Volume (VPM) into the Black Magician indicator. This indicator (green bars) allows us to detect unusual volume activity. By unusual I mean situations where an asset shows a trading volume above usual. With this indicator we can detect when strong (institutional) hands are distributing their capital or beginning to accumulate. Later, Javier Alfayete modified this indicator and introduced the Average Proportional Capital (CPM), which performs the same function, but is measured with the price of the asset in question.
The climatic volume allows us to identify the movements of the institutional ones. Source: Tradingview.
How does the Black Magician work?
We are going to put into practice what we learned in the theoretical part of the Mago Estraperlo indicator. We will do the explanation together using Bollinger bands. These will allow us to more easily visualize the contractions and expansions of the price.
1. When the Bollinger bands narrow, there is a contraction in the price, at which point the Atlas tells us that we have entered a range by displaying the blue bars below the 0 level.
The Bollinger bands are narrowing and the Atlas begins to descend.
2. As new bars form below 0, we have to count how many bars are formed. This is because the more bars that form, the more a movement can consolidate. In addition, we must monitor how much the Atlas bars are discharged below zero. At this moment we are observing how the Bollinger bands are narrowing.
3. The Atlas shock intensity is categorized from 0 to 1 low impact, 1 to 2 normal impact and 2 to 3 strong impact. The longer the time frame, the stronger the Atlas charge will be, that is, when it begins to charge in a small time frame, therefore in the following higher time frames we can see the intensity of that download. It is important to try to identify the levels of accumulation and distribution in order to make the most of this indicator.
The Bollinger bands indicate the accumulation period, where more bars are forming in the Atlas.
4. When we see that the Atlas has marked a minimum, we wait to see when it begins to download 30% of the minimum point of the Atlas. We can rely on the climate candles to confirm that the upward discharge of the Atlas is accompanied by an institutional movement. At the same time, it is advisable to look at the position of the price of the Bollinger average.
The Bollinger bands are widening, while the Atlas has already discharged 30%.
5.This is when we observe that little by little the Bollinger bands are widening and the Atlas flying above 0. We must be cautious because the Atlas can turn around and change the direction of the expansion.
The Bollinger bands are in an expansion phase and the Atlas is above the 0 level.
6. From here the expansion occurs, where we observe the Estraperlo where it tells us that the price is heading. The Atlas will tell us when volatility subsides and when the movement can be reversed.
The Atlas has marked a maximum, where we can see a sequence of maximums in the price.
It loses strength, we can see it in the Bollinger bands. As an extra tip for using the indicator: you can observe how the development of the Black Magician's movements in small time frames can be transmitted to larger time frames. And we already know that the longer the duration, the greater the benefits...
Conclusions from this trading training
After having completed this trading training on the Mago Estraperlo indicator, we can see that it is a great indicator to detect moments of lateralization and price expansion. Together with the Bollinger bands they constitute a great combination to be able to take advantage of market movements. Let's remember that we must concatenate each signal that we see in the indicator with other temporalities to have more accurate confirmations.
You can use the indicator that you have learned in this trading training on the Tradingview platform. Source: Tradingview.
Without further ado, you can find the Mago Estraperlo indicator in the Tradingview public script library. Just go to the indicators section, then look for the indicator and select the one called “Mago Estraperlo 2.0” Albertoe, with 339 downloads.