Four Best Indicators for MetaTrader 4
The trading platform MetaTrader 4 provides many tools that can help traders gain a good understanding of the markets. To enhance your trading results, you can use only the essential instruments. Here are four indicators that are the best base for trading on MetaTrader 4.
Moving Average
What it is. Moving Average helps identify the start/end of a trend and determine support/resistance levels. It can also help you generate buy and sell signals. It all becomes possible because traders can customize the MA calculation based on any specific period.
How to read it. If the short-term simple Moving Average crosses above the longer-term simple Moving Average from below, it’s a signal to buy. On the other hand, if the short-term simple Moving Average crosses below the longer-term simple Moving Average from above, it’s a signal to sell.
How to use it. Moving Averages is a useful tool to trade most of the available instruments. Moving Averages may not be effective in strongly trending markets influenced by external factors. Therefore, it’s essential to confirm the Moving Average analysis with other tools.
Bollinger Bands
What it is. Bollinger Bands is a lagging indicator. It comprises lines that indicate the average, upper, and lower limits reflecting standard price deviations. These lines help determine whether an asset is overbought or oversold, which can help identify buying and selling opportunities.
How to read it. If prices fall below the upper line in Bollinger Bands, it suggests that prices are overbought and selling may be a potential opportunity. Conversely, if prices rise above the lower line in Bollinger Bands, it suggests that prices are oversold and buying may be a potential opportunity.
How to use it. Bollinger Bands can effectively pinpoint buying and selling opportunities. They are most useful for identifying entry and exit points during periods of limited movement or consolidation in the market. Still, Bollinger Bands may not be effective in strongly trending markets. Use it with other technical indicators to determine the price movements accurately.
Relative Strength Index
What it is. The Relative Strength Index, or RSI indicator, is a scale that ranges from 0 to 100, calculated by analysing the fluctuations in closing prices over a specific time frame. It estimates the relative asset prices over the same period. It helps identify overbought or oversold assets, making it helpful in detecting potential buying and selling opportunities.
How to read it. When the RSI indicator surpasses a level of 70, it suggests that an asset is overbought, and it might be a good time to sell. On the other hand, if the indicator falls below 30, it suggests that assets are oversold, and it might be a good time to consider buying.
How to use it. RSI indicator can be a powerful tool for detecting buying and selling opportunities. It’s commonly employed to spot entry and exit points in markets that are either moving sideways or within a narrow range.
Like Bollinger Bands, RSI is a lagging indicator that relies on past traded prices. To make informed investment decisions, use the RSI indicator alongside other analytical tools and sources.
Stochastic Oscillator
What it is. The Stochastic Oscillator helps determine whether an asset is overbought or oversold based on the closing price within a specific price range and over a set period.
The Stochastic Oscillator consists of two lines beneath the price chart. The first line is called %K, and the second line is called %D. %K is calculated by comparing the current closing price. The %D value is calculated based on the moving average of %K, and it helps determine whether an asset is overbought or oversold.
How to read it. If %K surpasses 80, it suggests that the asset is overbought, which may be a chance to sell. Conversely, if %K drops to 20, it indicates that the asset is oversold, making it a potential buying opportunity.
How to use it. The Stochastic Oscillator is most effective for identifying entry and exit points during sideways or narrow-range markets. This tool can assist in identifying buying and selling opportunities, but it’s best used with other methods.
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