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In April 2023, the foreign exchange (forex) market reached a total value of about $7.6 trillion. This figure can give you an idea of how popular forex trading is compared to other financial markets.
When trading forex currency pairs, numerous tools are available to help improve your strategy while managing your risks. Among these tools are forex indicators that you can use on MetaTrader 4 (MT4).
Suppose you have a trading account with a broker that has the MT4 platform. What indicators can help you trade forex? Where can you find these indicators?
This article discusses the different MT4 indicators you can use to make informed decisions when trading forex and explains where you can access these indicators on MT4.
What Are MT4 Forex Indicators?
MetaTrader 4 indicators are helpful technical analysis tools to help you identify market trends and predict future price movements.
Technical analysis is a trading discipline for assessing investments and identifying trading opportunities in price patterns and chart trends.
The MT4 Indicators
MetaTrader 4 has numerous indicators. Some are free, while some come at a cost, depending on which developer or broker provides those indicators.
The following sections discuss some of the common indicators you can find on MT4.
MACD
Moving average convergence/divergence, known as MACD, is among the most popular forex indicators MT4 uses. The MACD is a trend indicator demonstrating the relationship between two exponential moving averages of a security’s price.
To calculate the MACD, subtract the 26-period exponential moving average (EMA) from the 12-period EMA. The result is the MACD line.
Additionally, you have a nine-period EMA called the signal line plotted over the MACD line. The signal line acts as a trigger for buy and sell signals.
When you put these lines together, you can interpret the MACD indicator in the following ways:
- Crossover: When the MACD falls below the signal line, this movement may indicate a sell signal. If the MACD crosses above that signal line, your indicator may be suggesting a buy signal.
- Divergence: If the asset price moves away from the MACD, this event suggests that the current trend is ending.
- Dramatic rise: When the MACD rises sharply, and the short M.A. moves away from the long-term M.A., these actions may indicate overbought conditions, and the asset will likely return to normal levels.
Money Flow Index (MFI)
The MFI is a momentum trading indicator utilising an asset’s volume and price to forecast a current trend’s reliability. Because the MFI adds trading volume to the relative strength index (RSI), you can consider the MFI as a volume-weighted RSI.
The RSI is a momentum indicator that measures the magnitude and speed of a security’s recent price changes.
When computing for the MFI, consider using a 14-day period for your calculations. The first step is to determine the typical price by adding the asset’s low, high, and closing prices and dividing them by three. The formula is as follows:
(Low + High + Close) ÷ 3 = typical price
Next, calculate the raw money flow using the formula:
Volume x typical price = raw money flow
To determine the money flow ratio, you must use the following formula:
14-period positive money flow ÷ 14-period negative money flow = money flow ratio
This calculation creates positive money values when the current typical price exceeds the previous one. The opposite is true for negative money flow values.
Finally, calculate the MFI using the following formula:
100 – (100 ÷ (1 + money flow ratio)) = MFI
If you use this indicator in forex trading, consider monitoring and waiting for the MFI indicator to move in a direction opposite the price. This divergence may frequently lead to a change in the current trend.
On-Balance Volume Indicator MT4
On-balance volume (OBV) is a MetaTrader 4 forex indicator that measures a specific security’s negative and positive volume flows relative to the price over a particular period.
The OBV indicator maintains a cumulative total volume by adding or subtracting each period’s volume, depending on the security’s price movement.
Aside from measuring volume, this indicator combines volume with price movement.
As such, a rising OBV indicator may signal a volume increase with upward price action. Conversely, a decrease in the security’s OBV may indicate a volume increase when the prices go down.
Accumulation/Distribution Line
The accumulation/distribution (A/D) indicator is among the most commonly used MT4 indicators. The A/D indicator looks similar to the OBV indicator, but A/D considers the period’s trading range instead of relying only on the security’s closing price.
You can use the A/D indicator to see a more accurate illustration of money flow than OBV does. An uptrend A/D line signals increasing buying pressure. On the other hand, a downtrend line indicates increasing selling pressure within the specific asset.
Bollinger Bands
Bollinger bands allow you to measure volatility. They consist of two bands positioned two standard deviations above and below a moving average trendline.
Standard deviation measures a dataset’s dispersion relative to the mean and is computed as the square root of the variance.
When the bands widen, this event indicates increased volatility. On the other hand, bands moving closer could mean less volatility.
Market Facilitation Index (BW MFI)
The Bill Williams market facilitation index (BW MFI) is an MT4 indicator that shows an asset’s price changes for a specific tick.
A tick is the minimum downward or upward movement in a security’s price.
In forex trading, you can refer to these movements as pips, the smallest units of measurement in a foreign exchange quote.
For example, buying a GBP/USD currency pair for 1.3132 and selling it for 1.3142 means you make 10 pips on your trade (1.3142 – 1.3132 = 0.0010 or 10 pips).
When this indicator displays an increase in the asset’s volume, the situation may signal the opening of more positions, indicating that movements are picking up pace. This event also suggests an increasing number of traders entering this market.
If the BW MFI falls, the volume also does, meaning traders lose interest in this market.
Sometimes, this indicator can substantially rise even when volume falls, suggesting that this market has no considerable volume support from traders. The price will then adjust accordingly as traders’ speculations change.
Suppose the BW MFI falls, but volume rises. When this situation happens, the market will likely experience increased buy and sell volume despite the price remaining essentially the same.
Eventually, one side, either the buyers or sellers, will dominate. This breakout can indicate whether the trend will continue or end.
Commodity Channel Index (CCI)
The CCI indicator is another popular MT4 forex indicator due partly to its capacity to show direct buy and sell signals.
When you use CCI as part of your forex trading strategy, this indicator can help you decide whether to enter a long (buy) or short (sell) position.
In MT4, the CCI’s default value is 14. You can set this number at a higher value. Doing so can cause the indicator to slow down, but the result is fewer false trading signals.
When the CCI crosses above the +100 line, you can consider it as a buy signal. Conversely, the CCI crossing below -100 can indicate a sell signal.
Sometimes, the signals contradict the forex market’s overall trend. In such cases, you can choose not to trade or use trailing stop losses as part of your risk management strategy to help minimise or prevent losses.
A stop-loss order is an instruction to lock in a profit or limit your loss on an existing position. When your trades become unfavourable, this order can execute automatically at your designated market price.
A Closer Look at Recommended Forex Indicators
Whether you’re a beginner or an experienced trader, you can use MT4 indicators as part of your technical analysis to predict a particular security’s future prices or price direction.
Technical indicators do not analyse fundamental factors affecting the asset’s price. Fundamental factors include revenue and profit margins.
Suppose you are an active forex trader who prefers short-term trading methods like day trading or scalping. You will likely rely on technical indicators because they are designed to help you detect and analyse short-term price movements.
Other technical indicators to trade forex include pivot points and the Fibonacci sequence.
A pivot point helps determine the market’s overall trend over different timeframes. The Fibonacci indicator enables you to identify support and resistance levels.
Many of the best forex indicators in MT4 show their results on an asset’s price chart. Other indicators, such as oscillators, display the results in a separate window.
If you’re an experienced trader, you may use a trading system to place trades. For example, Auslanco is a forex trading system using 15-minute timeframes and multiple indicators. This system also works well on GBP/JPY (British pound and Japanese yen) currency pairs.
Exploring Reliable Forex Indicators for MT4
When you need reliable MT4 indicators for forex trading, you can refer to the indicators discussed in this article.
You can also ask expert analysts and other professional traders who use MT4 or similar platforms like MetaTrader 5.
Where Can You Find MT4 Indicators?
To access the indicators in the MT4 trading platform, go to the “Navigator” window at the upper left of your screen and open the “Indicators” folder.
Drag the indicator you want to use on a price chart. A window will then pop up to let you decide the parameters you want to set.
Taurex provides plenty of trading tools through MetaTrader 4. If you need real-time pricing and advanced charting with customisable indicators and scripts, consider Taurex’s MT4 as your platform of choice.
How Do You Download MT4 Indicators?
Let’s say your chosen broker allows you to trade forex through MT4. You can download your MT4 indicator by visiting your preferred broker’s website and going to the indicator’s download page or link.
Select the indicator you want to install and click on the download button. Afterwards, follow the instructions to install the MT4 indicator on your platform.
Technical Indicators
Technical indicators are mathematical calculations of a security’s price, volume, or both to help you forecast price movements. You can decide when and how to open or close positions according to the signals from these indicators.
Indicators are divided into two groups based on functionality:
- Trend indicators: These indicators help assess the price direction and detect turn moments synchronously.
- Oscillators: These indicators let you find the turning moments ahead or synchronously.
What Are Expert Advisors, and How Do You Use Them?
An Expert Advisor (E.A.) is a program that lets you automate trading in MT4. EAs use algorithms to monitor the markets on your behalf and open or close positions based on your predefined parameters.
After you enter a position, EAs can add stops and limit orders to help minimise your risk exposure.
One example of this program is the Matrix Arrow E.A., which can use up to 10 standard indicators that include the following:
- ADX (average directional index, a technical indicator for determining a trend’s strength)
- CCI
- MACD
- RSI
- Classic Heiken-Ashi candles
Heiken-Ashi is a candlestick pattern technique (so-called due to the candle shape of the bars in the chart) that makes spotting trends and reversals easier.
Long downward candles with little upper shadows indicate strong selling pressure. Long upward candles with little or no lower shadows suggest strong buying pressure.
Frequently Asked Questions (FAQs)
- Which MT4 indicators will allow me to see support and resistance levels?
Some notable indicators you can use to identify support and resistance levels are “support resistance” and “support resistance indicator”.
“Autochartist” is another indicator that can identify support and resistance by performing the function of multiple indicators at once, thanks to its advanced pattern recognition software.
- Which MT4 indicators can be used for commodities trading?
You can use moving averages as indicators for commodities trading. They let you gauge the market trend’s direction and find buying and selling opportunities.
- How do I create my custom indicator?
The process of creating your custom indicator is similar to that of creating an Expert Advisor.
To create one in the MT4 platform, press F4 on the keyboard to launch the MetaEditor display. In the display, click “New”, then choose the MQL Wizard, which will help create your custom indicators.
- How do I install an MT4 indicator?
To install an MT4 indicator, copy its file into the “Indicators” folder. You can find this folder by clicking “File” in the top navigation bar and selecting “Open Data Folder.”
- Can I try out MT4 indicators using an MT4 demo account?
You can install free apps and indicators in an MT4 demo to test them without using real money.
References
- Technical Analysis: What It Is and How to Use It in Investing
https://www.investopedia.com/terms/t/technicalanalysis.asp
- MACD Indicator Explained, with Formula, Examples, and Limitations
https://www.investopedia.com/terms/m/macd.asp
- Relative Strength Index (RSI) Indicator Explained With Formula
https://www.investopedia.com/terms/r/rsi.asp
- Standard Deviation Formula and Uses vs. Variance
https://www.investopedia.com/terms/s/standarddeviation.asp
- What Is a Tick in Securities Trading and How Does It Work?
https://www.investopedia.com/terms/t/tick.asp
- What Are Pips in Forex Trading and What Is Their Value?
https://www.investopedia.com/terms/p/pip.asp
- Stop-Loss Orders: One Way To Limit Losses and Reduce Risk
https://www.investopedia.com/terms/s/stop-lossorder.asp
- Pivot Point: Definition, Formulas, and How to Calculate
https://www.investopedia.com/terms/p/pivotpoint.asp
- What Are Fibonacci Retracement Levels, and What Do They Tell You?
https://www.investopedia.com/terms/f/fibonacciretracement.asp
- Heikin-Ashi Technique Definition and Formula
