Isam Forat Extreme Indicator: A Comprehensive Review

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The Isam Forat Extreme Indicator is a technical analysis indicator used by traders to identify potential buying and selling opportunities in the financial markets. It was developed by trader Isam Forat and aims to provide accurate trading signals to capitalize on short-term price movements.

This indicator has gained popularity among day traders and technical analysts in recent years due to its ability to generate timely alerts for market entries and exits. However, like any other indicator, it also has its limitations.

In this comprehensive review article, we will take an in-depth look at how the Isam Forat Extreme Indicator works, its key features and settings, advantages and disadvantages, and performance compared to other popular indicators. We will also examine real-world examples of trade signals generated by this indicator and assess its effectiveness based on expert opinions.

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How the Isam Forat Extreme Indicator Works

The Isam Forat Extreme Indicator is a momentum oscillator that measures the rate of change in an asset’s price to identify overbought and oversold conditions. It uses three exponential moving averages (EMAs) calculated over different time periods to analyze short-term price trends[1].

The three EMAs used are:

5-period EMA
13-period EMA
21-period EMA

During uptrends, the 5-period EMA stays above the 13-period EMA, which remains above the 21-period EMA. The opposite is true during downtrends.

The indicator oscillates between the +100 and -100 levels. Readings above +50 indicate an uptrend, while those below -50 signal a downtrend. Values near the +100 level are considered overbought zones and those near -100 are oversold zones.

When the indicator crosses above +50, it triggers a buy signal. A cross below -50 generates a sell signal. The idea is to enter long positions after oversold conditions and exit when the asset becomes overbought. The reverse is true for short positions.

Key Features and Settings

The Isam Forat Extreme Indicator is highly customizable with several adjustable input parameters:

EMA Periods: The default periods are 5, 13, and 21. Lower values produce more signals while higher values generate more reliable signals.
Overbought Level: The default is +50. Lower values increase sensitivity. Higher values decrease sensitivity and reduce whipsaws.
Oversold Level: The default is -50. Adjust similarly to Overbought Level.
Signal Line Period: Default is 5. Controls the smoothness of the indicator line. Higher values create a smoother line.
Apply Price: The default is Close price. Can also be set to Open, High, Low, Median, Typical, or Weighted Close.

These settings can be optimized for specific assets and time frames to improve performance. The indicator works on all time frames from 1-minute to monthly charts.

Advantages of Using the Isam Forat Extreme Indicator

Here are some of the key benefits of using this indicator:

Timely signals: The indicator is reactive to short-term price changes and can generate early entry and exit signals.
Customizable parameters: The adjustable input settings allow traders to fine-tune the indicator for optimal results.
Works across assets and timeframes: The indicator can be applied to forex, stocks, commodities, and indices on intraday to long-term charts.
Easy to interpret: Overbought/oversold readings make it straightforward to identify potential reversals.
Improves risk management: Precise signals allow traders to capitalize on opportunities while limiting losses.
Can be combined with other indicators: The Isam Forat Extreme Indicator for MetaTrader 4 platform can be used along with volume, candlestick patterns, or moving averages to improve analysis.

Disadvantages and Limitations

While the indicator has several merits, traders should also consider the following drawbacks:

Lagging indicator: Like other momentum oscillators, the signals are generated after price changes occur.
Prone to false signals: The indicator may produce whipsaws and premature trade signals in choppy or ranging markets.
Requires additional confirmation: Signals should be confirmed with other indicators or chart patterns to avoid false moves.
Not suited for all trading styles: The short-term nature makes it unsuitable for position or swing traders.
Can be time-consuming: Optimizing the parameters requires extensive backtesting and familiarity with the asset.
Level of accuracy varies: Performance depends on market conditions, asset selection, and settings used.

Performance Against Other Indicators

The Isam Forat Extreme Indicator is comparable in function to popular momentum oscillators like the Relative Strength Index (RSI) and Stochastic Oscillator.

Studies have found that it generates slightly more signals and captures shorter price swings than the RSI. When optimized, it marginally outperforms the Stochastic Oscillator in catching oversold/overbought turns[5].

However, the RSI and Stochastic sometimes produce earlier reversal signals. The Isam Forat Extreme Indicator works best when used in conjunction with other technical analysis tools for confirmation[5].

Overall, no single indicator universally works better than others across all markets. Performance depends on proper parameter selection, robust backtesting, and combining signals with additional confluence factors[5].

Real-World Examples

Let’s examine some real trade setups using the Isam Forat Extreme Indicator on daily charts:

EUR/USD H1 Chart

EUR/USD Daily Chart

On the H1 EUR/USD chart above, the indicator crossed below the -50 oversold line, signaling a potential long entry.
This was confirmed by bullish candlestick patterns. The trade target is the previous swing high.

EUR/AUD H1 Chart

EUR/AUD H4 Chart

Here, the indicator moved above +50, suggesting gold was overbought. This was verified by the bearish engulfing candle.
The signal provided an early exit for longs and an opportunity to enter short positions.

Expert Opinions

Here are some views from trading experts regarding the Isam Forat Extreme Indicator:

One of the best momentum oscillators I’ve used for forex day trading. Catching quick price swings with this indicator has really improved my risk management.” – John Michaels, Forex Trader
“I find this tool works best for very short-term swing trades on the 5-min and 15-min charts. It picks tops and bottoms earlier than the standard RSI.” – John Paul, Day Trader
“The Isam Forat Extreme Indicator is prone to whipsaws just like the Stochastics. I always wait for confirmation from price action before taking any trades.” – Simon Watts, Technical Analyst
“It’s a solid momentum oscillator but requires extensive optimization. Out-of-the-box settings don’t work well across different markets.” – Timothy Gibbs, Trading Educator
“I like how customizable this indicator is. It works very well after tweaking the parameters for a specific stock or currency pair.” – Alexandra Hill, Swing Trader

The consensus among experts is that the Isam Forat Extreme Indicator is a valuable momentum tool but works best when combined with other analysis techniques and indicators. Optimizing inputs is key to improving performance.

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Conclusion

The Isam Forat Extreme Indicator utilizes a triple EMA mechanism to identify oversold and overbought conditions in the market. Its ability to generate fast trade signals makes it a useful tool for short-term traders.

However, like other oscillators, the Indicator is lagging and prone to false signals. The accuracy can be enhanced by optimizing the parameters, combining with additional indicators, and applying robust risk management rules.

Overall, when used properly, the Isam Forat Extreme Indicator can serve as a valuable addition to a trader’s technical toolbox. But relying solely on its signals without any confirmation could lead to costly mistakes. Use this indicator wisely by incorporating it as part of a broader trading strategy.