Logarithmic Rate Return Indicator

The Logarithmic Rate Return indicator for MT4 is an essential tool for forex arbitrageurs. It plots the logarithmic scale of three currency pairs. Any discrepancies between them results in an arbitrage opportunity. Alternately, the price movement of two currency pairs is normally followed by the third one. As a result, forex traders can use this tool to effectively look for triangular arbitrages or predict price movement of the third currency pair using the movement of others.

New forex traders should familiarize with the principle of triangular arbitrage. However, advanced forex traders can use it effectively in confluence with other technical indicators. Additionally, this indicator is an excellent source for automated trading strategies. The arbitrage opportunity may not exit for a longer period of time and market will correct itself accordingly. Though the indicator works on all chart time frames; it is effective in lower time frame intraday price charts.

Logarithmic Rate Return Indicator For MT4 Trade Setup

The indicator plots the EURUSD values as Lime, GBPUSD as Blue and AUDUSD as White with a Zero line in a separate indicator window. Traders can notice that the indicator values move away from the Zero line and return back to it. Another feature to notice is how all the three movements are similar to each other. In other words, all the three lines move in sync and follow each other.

For example, if the EURUSD and GBPUSD move away from the Zero line and start to pull back to the zero line. Traders can anticipate that the AUDUSD prices will follow suit.

Indicator Settings

Symbol_1 to 4: Choose the currency pairs for arbitrage. Note that the main pairs are the first three.

Conclusion

In summary, the Logarithmic Rate Return indicator for MT4 is effective arbitrage tool. However, forex traders should have enough knowledge to identify and execute them profitably.