A trading strategy using the SSL indicator

As you've probably noticed, there's already a ton of technical indicators out there, and here's yet another one, which recently popped up on our radar.

Known as the SSL, the Semaphore Signal Level channel chart alert is an indicator that combines moving averages to provide you with a clear visual signal of price movement dynamics. In short, it's designed to show you when a price trend is forming.

To do this, it shows you two different-coloured lines that follow the evolution of prices. The indicator is typically on your existing chart, but there are also non-chart versions. It all depends on your preferences: do you prefer your chart to be clean and simple and your indicators to appear separately in another window or do you want everything displaying in one place, which makes cross-referencing easier? Also, as SSLs are designed as an overlay indicator, if you go for a non-chart version, you need to make sure that it performs as intended.

When the two lines intersect, the indicator signals that the price movement is changing direction or is about to. When you add SSL to your trading platform, you have the option of choosing the colour of the lines - be sure to choose colours that don't conflict with other indicator lines that you use! Having a cluttered chart can be bad enough without having to squint to see colours that are too similar or cancel each other out.

In addition, SSLs include alerts. It depends a bit on how you want to trade, but I recommend that you turn off these alerts, especially when you have a good idea of ​​how the indicator works and what you want to do with it. There's another reason why turning off alerts is probably better. This is because the indicator can give you false signals when the price swings before a candle closes. You would then risk receiving alerts before you can actually use them, which could confuse or mislead you. Many technical traders who use indicators will advise you to wait for a candle to close before acting on a signal from your indicator (including SSLs).

SSL chart

Download the SSL indicator for MT4

A quick and easy SSL strategy

The SSL is supposed to show you when a price trend is changing, but how does it actually work?

As with any indicator that you plan to use, you're going to want to put this one through a fairly robust testing regime that includes both backtesting and forward testing via a demo account. And what you'll find out when testing SSL is that here and there it shows some pretty juicy price trends. Remember that when the two lines intersect, SSL tells you that the price movement is changing direction and you can use that as an entry signal if you are sure that this change in direction (or reversal) is likely to turn into a trend.

However, you'll also notice that the SSL can also lead to dead ends that will cost you money. You will especially notice this when the SSL detects changes in direction that do not turn into actual trend changes.

You may find, though, that these losses are offset by the gains made when SSL sucessfully detects a trend. Nonetheless, you will still want to minimise these losses and the way to do this is to pair SSL with a 2nd indicator that will help you eliminate at least some of those losses without preventing you from making gains.

The best way to do this is to pair SSL with a volume or volatility indicator and some strategies also suggest using a momentum indicator. Examples of indicators that SSL is commonly paired with include the ATR, the RSI (relative strength index), a volume oscillator, and a stochastic indicator. Whichever one you choose, the outcome you are looking for is for this additional indicator to tell you whether a change in price direction signaled by SSL has the strength to turn into a price trend.

So what could a typical SSL trade look like? Well, you will be on the lookout for the convergence and intersection of the two SSL lines, which will give you the initial signal that the price movement is changing direction and a trend may emerge. At this crossover point, you'll want to check what your confirmation indicator is telling you - for example, if there's insufficient market volume at this point, you should hold back and avoid entering a trade. If, on the contrary, the volume is there to indicate that there would be a force behind the movement, it is an entry signal. You can hold back until an additional candlestick is completed before entering a trade, as this will protect you even more against hesitations or price pullbacks. By pairing SSL with a good second indicator to filter out price movements that lack strength, you can sharply reduce the losses it would otherwise generate.

SSLs and exit signals

One cool feature with SSLs is that they provide both entry and exit signals. As mentioned earlier, you can enter a trade when the SSL lines cross (assuming your other indicators confirm the trade signal) and this will hopefully allow you to follow a nice price trend. Just like the entry signal, the SSL lines will converge and cross again. As you've probably guessed, this indicates that the price movement is about to change direction - if you're in a trade, this would be an exit signal.

So, if you end up using SSLs, you should use them both to enter and exit your trades. But that's not necessarily a bad thing. As you will see if you test it, the SSL indicator has the potential to provide you with some nice trends and, assuming you stick to the system that you've designed, you should be able to generate gains that outweigh the losses that it causes.


SSLs can be used as a combined entry and exit indicator that will lead you to identify price movement trends and, if properly paired with a confirming secondary indicator, can help you take advantage of those trends. When the market is not trending, SSLs can generate wrong signals which can lead to losses, but these can be mitigated by using it in conjunction with a good volume or volatility indicator.

Even if you don't use it as part of your trading system, SSLs are a great learning tool. Just testing it and seeing what other indicators it pairs well with can help you grow as a trader. Plus, it's a useful asset to have on hand and once you start fine-tuning it, adjusting parameters, and playing around with secondary indicator combinations, you may find that this indicator has genuine value.

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