Technical indicators are primarily found in trading platforms like MetaTrader 4 (MT4). It is a calculation that came from volume and price data. They can either appear as an overlay into the price chart or below it. Traders and technical analysts use these indicators to determine what will happen in the future and check for possible opportunities in trading. Technical indicators are used in different markets such as stocks, Forex, and any other market that’s tradable. You will see a standard parameter in almost all indicators but it can be easily adjusted based on your trading strategy and what suits you best.
In one trading platform, there are more than 100 indicators that you can take advantage of. However, it is advisable to only use 3 to 4 indicators and stick to them. This will keep you from complicating your trades and your strategy. This time, we are going to tackle the most used indicators in MT4 and other markets.
Moving Average and Trend Indicators
If you are looking for the simplest to use indicator then you must try the Moving Averages. This indicator provides clarity towards the price action when it becomes too volatile. You can base your decision on identifying the trend’s direction using a moving average. Moreover, you can use more than one moving average together to predict long-term trends, medium-term trends, and short-term trends. If you notice a crossover in the moving average, this might also be an indication of changes in a trend.
Other indicators that help identify the strength of a trend and direction are On Balance Volume (OBV), Moving Average Convergence Divergence (MACD), Average Directional Index (ADX), and Parabolic Stop and Reverse Indicator (SAR).
Another indicator that measures volatility is the Price Bands. This indicator is used to identify the market ideal for you and if the volatility is falling or rising. The most used among price bands are the Bollinger Bands. They are made when you add or subtract the standard deviation given at a price change towards a moving average. It can be used for breakout trading strategies and mean reversion trading strategies.
Other kinds of price bands used in trading platforms include Keltner Bands, Percentage Price Bands, and Donchian channels.
Oscillators are made up of formulas coming from the price data that takes place over a certain period of time. They can oscillate in two values which can be 0 and 100/-100 and -100 and +100. This indicator is created below a price chart and is usually used in indicating oversold and overbought situations, confirmation on the entry and exit points, and changes in the price direction.
As for the most used oscillators in MetaTrader 4 today, it is the Relative Strength Index (RSI). It can be calculated through the use of the higher closes and lower closes ratio. When calculating the RSI, you can use the previous price data for 14 periods. Aside from RSI, there are other well-known oscillators. These include Moving Average Convergence Divergence (MACD), The Commodity Channel Index (CCI), and the Stochastic Indicators.