Intermediate

Top Indicators for MT4

MT4 indicators help analyse forecasted currency pair prices and place exit or entry orders accordingly. MT4 even offers some advanced indicators that cannot be used otherwise, making the forex trading experience more seamless and the overall trading strategy a success. Let’s take a look at the MT4 indicators that you can use to place successful trading orders.

What are forex indicators?

Forex indicators are tools that help traders examine market data and predict future market trends. They help predict future market behaviour and the patterns that are most likely to occur. Most forex traders rely on technical indicators as they help analyse price movement in both the long and short term.

Why use forex indicators on MT4?

Forex indicators can be used on MT4 to create powerful trading strategies and place successful orders. With forex indicators on MT4, you can use different price action strategies to understand the current market movement and where it is headed.

Top indicators for MT4

Bollinger Bands

Bollinger Bands is a MetaTrader 4 indicator that can indicate currency pair highs and lows in a particular time period and tell traders about overbought and oversold market positions. It comprises two bands, one of which is two standard deviations above the moving average line and one is two standard deviations below it.

• When Bollinger Bands on the MT4 platform indicate that the currency pair prices are moving closer to the upper band, it indicates that the market is overbought and can reverse into a downtrend anytime, signalling traders to place short orders.
• When the Bollinger Bands on the MT4 platform indicate that the currency pair prices are moving closer to the lower band, it indicates that the market is oversold and can reverse in an uptrend anytime, signalling traders to place long orders.

Moving Average Convergence Divergence

The Moving Average Convergence Divergence (MACD) indicator is a trend-following indicator that determines the relationship between a long-term moving average and a short-term moving average. It provides traders with buy or sell signals depending on the crossover between the MACD line and the signal line. The MACD line is calculated by subtracting the 26-period (long-term, slow-moving) Exponential Moving Average (EMA) from the 12-period (short-term, fast-moving) EMA. The signal line is the 9-period Exponential Moving Average.

• A buy signal is sent to traders when the MACD line crosses the signal line from above, as an uptrend is expected.
• A sell signal is sent to traders when the MACD line crosses the signal line from below, as a downtrend is expected.

When using the MACD indicator on the MT4 platform, there are three things that you can interpret from the indicator –

• A crossover is interpreted when the MACD line falls below (or above) the signal line, indicating a bearish (or bullish) trend signal and telling traders to place short (or long) orders.
• A divergence is interpreted when the currency pair price diverges from the MACD line significantly, resulting in an end of the current trend and the start of a new trend, also known as a reversal.
• The last interpretation is the dramatic rise where the MACD line increases drastically, and the short-term moving average diverts from the long-term moving average, signalling traders that the currency pair right now is overbought and short orders should be placed to trade the bearish reversal.

On Balance Volume indicator

The On Balance Volume (OBV) indicator is one of the most widely used technical indicators for the momentum that indicates an overall bullish or bearish market behaviour. The OBV indicator uses the currency pair’s traded volume to predict the forecasted market trends that help traders enter or exit the market.

• When the currency pair closes below the previous day’s closing price, the current OBV = previous OBV – current volume.
• When the currency pair closes above the previous day’s closing price, the current OBV = Previous OBV + today’s volume.

The indicator also measures negative and positive volume flows on the MT4 platform and combines the price fluctuations with the volume. The combination helps traders predict the prices at which they can enter buy or sell positions to place successful trade orders.

• When the OBV indicator is increasing, the currency pair volume is expected to rise, and traders receive a signal to long or buy the trade.
• When the OBV indicator is decreasing, the currency pair volume is expected to fall, and traders receive a signal to short or sell the trade.

Money Flow Index

The Money Flow Index (MFI) indicator is a momentum indicator that measures the money flow in and out of the currency pair’s trading volume over a specific period of time. It helps traders identify the future price movement based on the current demand and supply of the currency pair in the forex market. On MT4, the MFI indicator can be used to utilise the currency pair’s price and volume, predict the future market trend, assess its reliability and place a trade accordingly. The MFI indicator adds the currency pair’s trading volume to the Relative Strength Index to confirm the market momentum.

• When the MFI provides a reading above 80 after being combined with the RSI, it indicates an overbought market and signals traders to place short orders.
• When the MFI provides a reading below 20 after being combined with the RSI, it indicates an oversold market and signals traders to place long orders.

The raw money flow in the market can be calculated as = volume of the traded currency pair * Typical price. Where typical price = (closing price + high price + low price)/3 Determine the money flow ratio as = 14-period positive money flow / 14-period negative money flow.

• When the current typical price is more than the previous typical price, there is a positive money flow.
• When the current typical price is less than the previous typical price, there is a negative money flow.

The last step towards calculating the Money Flow Index = 100 – [100/(1+Money Flow Ratio)]

• A constantly increasing value of MFI indicates a bullish market trend and signals traders to place buy orders.
• A constantly decreasing value of MFI indicates a bearish market trend and signals traders to place sell orders.

Market Facilitation Index

The Market Facilitation Index (MFI) is an indicator that you can use on the MT4 platform that measures the strength or weakness of a currency pair’s trend. The Market Facilitation Index provides you with signals about when you should enter a strong trend and exit a weak trend. It provides values that indicate the price change in each movement of the currency pair. The indicator is represented by four different colours, each signifying a different market behaviour.

• A green bar occurs when both the indicator and trading volume are increasing, and there is a strong current trend.
• A brown bar occurs when both the indicator and trading volume are decreasing, and there is a weak current trend.
• A blue bar occurs when the MFI is increasing, but volume is decreasing, indicating a short bullish trend, sending traders signals to long the trade.
• A pink bar occurs when the MFI is decreasing, but the volume is increasing, indicating a strong bearish trend, sending traders signals to short the trade.

You can trade with the MFI indicator based on these bars and grab trading opportunities in strong trends and avoid trading along with weak trends –

• When the Market Facilitation Index becomes larger, and the currency pair’s volume increases, it indicates that more and more buyers are entering the market, and a bullish trend is expected, signalling traders to place long orders.
• When the Market Facilitation Index becomes smaller, and the currency pair’s trading volume decreases, it indicates that more and more sellers are entering the market, and a bearish trend is expected, signalling traders to place short orders.

Accumulation/Distribution Line

The Accumulation/Distribution line is also one of the most widely used indicators on MT4 that determines the demand and supply of a currency pair on the basis of the volume and where the currency pair closes in a particular trading period. The line provides traders with a value between +1 and -1, based on which the traders can place buy or sell orders.

• When the Accumulation/Distribution line shows a value close to +1, it indicates accumulation in the market and signals traders to place buy orders due to the strong uptrend.
• When the Accumulation/Distribution line shows a value close to -1, it indicates distribution in the market and signals traders to place sell orders due to the strong downtrend.

The Accumulation/Distribution line can be calculated in three steps –

• Calculate the Money Flow Multiplier = [(closing price – low price) – (high price – closing price)]/ high price – low price.
• Multiply the money flow multiplier value by the volume of the currency pair to find the Money Flow Volume.
• Finally, find the Accumulation/Distribution line = previous Accumulation/Distribution + Currency period money flow volume.

Commodity Channel Index

The Commodity Channel Index (CCI) is a technical indicator that you can use on the MT4 platform to measure the price difference between a currency pair’s current price and the average historical price. It provides traders with values between +100 and -100. The Commodity Channel Index being above 0 shows that the current price is more than the historical average, providing traders with potential buying opportunities, and the index being below 0 shows that the current price is below the historical average, providing traders with potential selling opportunities.

• Whenever the CCI shows a value above +100, it indicates that a strong uptrend is starting, and traders should place long orders.
• Whenever the CCI shows a value below -100, it indicates that a strong downtrend is starting, and traders should place short orders.

The Commodity Channel Index can be calculated in the following way = [Average of (high price + low price + closing price) – Simple moving average of the average price for 20 periods] / 0.015* mean deviation.

How to install MT4 indicator?

• Locate the indicator on MT4 that you want to install and copy the file on your computer.
• Open the data folder on the MT4 platform and click on the ‘MQL4’ file.
• Open the indicators folder and paste the files that you have copied.
• Restart the MT4 platform.
• Use the indicator installed and apply it to your forex charts.

Use MT4 indicators today for a seamless trading experience

The MT4 platform comes with several tools and techniques that help you place successful trading orders. Start trading with the seamless forex trading platform of Blueberry Markets to access the full version of the MT4. Sign up for a live account or open a risk-free demo account to get started.