XM Forex Penguin
XM Forex Penguin

Popular Tools to Help with Forex Trading

Last Updated: Mar 2, 2022 @ 7:01 pm

Planning to start trading on MetaTrader 4? The world’s most popular trading platform comes with an abundance of trading tools built right in.

In this post, we are going to give you a rundown of these indicators and how you can use them for technical analysis.

Video Summary

Reminder: Below, we summarize what these indicators display and how you could potentially use them to trade. But they can only give you an idea of what might be happening in the market. None of them guarantee that price is going to rise or fall. Trading always involves risk.

Some Of The Popular Indicators

Alligator:

This indicator consists of a set of three Balance Lines, called the Alligator’s Jaw, Teeth, and Lips. All of these Balance Lines are moving averages. You can use the indicator to help you spot trends and possible counter-trends.

Awesome Oscillator:

Like the Alligator indicator, the Awesome Oscillator is a creation of Bill Williams. 5-period and 34-period Simple Moving Averages calculated from midpoints form the basis for this indicator. The difference between them is calculated to plot the Awesome Oscillator. When you see the Awesome Oscillator peaking below the zero lines, it means to sell. When it is above the zero lines and you see a gap, it means to buy.

Bollinger Bands:

You can measure volatility with this indicator. When you place it on your chart, you will see a pair of bands around the price. As they expand and contract, they show you increases and decreases in volatility.

Ichimoku Kinko Hyo:

If you want to visualize support and resistance along with momentum, you can do so with the Ichimoku Kinko Hyo, often just called “Ichimoku.” It is most useful for trend trading.

Momentum:

If you want to visualize the change in an asset’s price within a period of time, you can plot the Momentum indicator. If it slows down, a reversal may happen soon.

Money Flow Index:

This is a type of volume-weighted RSI (see Relative Strength Index). On your chart, you will see it as a rising and falling line that can have a value anywhere from 0 to 100. If the value rises above 80, conditions are overbought, whereas if they fall below 20, they are oversold.

Moving Average:

Among the most basic types of indicators, you can use is the moving average. As its name indicates, it depicts the average price over time. Depending on how they are calculated, moving averages can be simple, exponential, smoothed, or linear weighted. They help you to visualize trends. Plotting more than one moving average on your chart also gives you an opportunity to see if one line crosses another. When that happens, it may signal a reversal.

Moving Average Convergence/Divergence:

Abbreviated “MACD,” this indicator features a histogram together with a pair of moving averages. When the histogram expands and there is a moving average crossover, that may mean a new trend is forming. If, on the other hand, you notice the histogram and price moving in opposing directions, it could mean that a reversal is on the way.

Parabolic SAR:

Plotting the Parabolic SAR on your chart will produce a series of dots. When you see the dots above the candlesticks, that means it may be time to sell. If you see the dots below the candlesticks, you are looking at a buy signal.

Relative Strength Index:

When you plot the relative strength index (RSI) on your chart, you will see an oscillator between two horizontal lines. When the oscillator dips below 40, you have a buy signal. When it rises above 80, you have a sell signal.

Standard Deviation:

This indicator tells you what price is doing with respect to a simple moving average, providing you with a measure of volatility.

Stochastic Oscillator:

As with the relative strength index, the stochastic oscillator presents you with a pair of horizontal lines, marked 80 and 20, and another line that is oscillating in the middle. The market is overbought if the oscillating line crosses above 80, so it may be time to sell. If the line crosses below 20, the market may be oversold, so it could be time to buy.

Williams’ Percent Range:

This momentum indicator is yet another one that helps you to determine whether you are looking at overbought or oversold conditions. It works a bit like a stochastic, but it is more reactive. On the scale, if you see the line above -20, that means you should consider selling. If you see it below -80, that means to consider buying.

That wraps up our introduction to some of the most popular indicators that come with MetaTrader 4.

The List Does Not Stop Here

Keep in mind that this is not an exhaustive list and that you can also download additional indicators.

Some other popular indicators that come with MT4 include Accelerator/Decelerator Oscillator, Accumulation/Distribution, Average Directional Movement Index, Average True Range, Bears Power, Bulls Power, Commodity Channel Index, DeMarker, Envelopes, Force Index, Fractals, Gator Oscillator, Market Facilitation Index, Moving Average of Oscillator, On Balance Volume, and Relative Vigor Index.

Remember, to make the best use of these indicators, you will need to use them as part of a tested and reliable trading method.

Many methods involve using two or three indicators together and searching for confluence.

When you find confluence between different indicators, you have multiple signals telling you that it may be a good time to buy or sell. That usually means you have found a solid trade setup.

You will want to practice proper money management while using your strategy, and also see to your trading psychology.

To find out more, read The 3 Ms of Forex: Method, Money, Mental.

If you are new to trading and want to start a trading career, you can utilize the free trading capital that some brokers offer. Please get free $30 from XM no deposit bonus.


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