An Overview of the Best MT4 Indicators
To excel in the Forex market, traders need to learn how to identify what future price movements might be by implementing different types of analysis. One of the most well-known is technical analysis, which is based on assessing previous market data to determine potential future behaviour in the market.
This type of analysis is frequently associated with the use of various technical indicators, many of which come free with MetaTrader 4. In fact, traders have access to so many Forex indicators for MetaTrader 4 (MT4) that it can be difficult to know which ones to use. That’s why, in this article, we provide traders with an overview of the best MT4 indicators to incorporate into your trading strategies in 2022.
What Are Forex Indicators MT4?
Forex, or technical, indicators are tools that allow traders who use price action strategies to better understand what is happening in the market and to predict what direction the price may take next.
It is any type of metric with a value derived from the activity of the price of a currency pair or any other financial asset. As part of technical analysis, such MT4 indicators are used by traders to predict future price levels or the overall price direction of a particular security. They do this by analysing previous patterns or previous market performance.
Technical indicators are differentiated by the simple fact that they do not analyse fundamental factors that can affect the price. Fundamental factors include earnings, revenue and profit margins. Active Forex traders mostly rely on technical indicators, because these indicators are designed to analyse and detect price movement in the short-term.
Many of the best MT4 indicators offer their results directly on the price chart of an asset. This makes the analyst's job easier when they are comparing the MT4 indicators with the market price. Other types of the best MT4 indicators, such as oscillators, offer their results in a separate window.
Many long term traders or investors will not pay too much attention to most technical indicators. This is because they don't reveal much information about the fundamental factors that can also affect price. However, long term traders are still able to benefit from using technical indicators, because they are helpful in finding ideal entry and exit points, through analysing the long-term trend.
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The Best MT4 Indicators
Different MT4 indicators serve different purposes and, therefore, are more suitable for some trading styles and strategies than others.
For this reason, there is no real answer to the question of which are the best MT4 indicators, as this will change depending on the circumstances and the trader in question. However, there are many indicators all traders should be aware of.
In the following sections, we will take a look at some of the best Forex indicators for MetaTrader 4.
|Money Flow Index|
|Market Facilitation Index|
|Commodity Channel Index|
One of the most popular Forex indicators MT4 is the MACD - The Moving Average Convergence Divergence (MACD) indicator. This is a trend-following momentum indicator, which demonstrates the relationship between two moving averages of prices.
The MACD is calculated by subtracting the 26 session Exponential Moving Average (EMA) from the 12 session EMA. In addition, a 9 session EMA (known as the signal line) is then plotted on top of the MACD, operating as a trigger for buy and sell signals.
Technically, there are three ways that the MACD MT4 indicator can be interpreted:
The first one is 'Crossovers'. When the MACD drops below the signal line, this is a bearish signal that suggests it may be a good time to sell. On the other hand, if the MACD MT4 indicator rises above that signal line, then your indicator is showing a buy signal.
Most FX traders wait for a confirmed cross over the signal line prior to entering into a position, in order to avoid entering a position prematurely.
The second method is 'Divergence'. This is when the asset price actually diverges from the MACD, which indicates the end of the current trend.
The last method is the 'Dramatic Rise'. This is when the MACD rises severely. The shorter moving average pulls away from the longer-term MA, which is a sign that the security is overbought and is likely to return to normal levels.
Traders usually are watching for a shift either under or over this zero line, because this informs traders about the short-term average position relative to the long-term average position.
Also, when the MACD finds itself above the zero mark, the short-term average is sitting above the long-term average. This signifies momentum in an upward direction. The opposite is true when the MACD is below zero. Actually, this zero line often serves as an area of support and resistance for this indicator.
Money Flow Index (MFI)
The Money Flow Index (MFI) is a momentum indicator for MT4 that utilises an instrument's price and volume in order to make a prediction on the reliability of the current trend. Since the Money Flow Index adds trading volume to the Relative Strength Index (RSI), it is sometimes referred to as a volume-weighted RSI.
Arriving at the index figure demands several steps. It is recommended by various professional traders to use a 14 day period for your calculations. The first step we take is defining the typical price in the following way:
|(Low+High+Close) / 3|
The next step is to calculate the Raw Money Flow:
|Volume x Typical Price|
Then to determine the Money Flow Ratio you need to perform the following sum:
|(14 period Positive Money Flow) / (14-period Negative Money Flow)|
Positive values of money are created when this typical price is larger than the typical price value from before. In fact, the sum of positive money over the number of periods (mainly 14 days) is the positive money flow. The opposite is true for negative money flow values.
The last step is the Money Flow Index, that is: 100 - [100 / (1 + Money Flow Ratio)]. It is necessary to mention that many traders are monitoring and waiting for a moment in which the MFI indicator MT4 moves in a direction opposite to the price. This divergence can frequently be a leading indicator of a change in the current trend.
On Balance Volume Indicator MT4
The On Balance Volume (OBV) is a Forex indicator for MT4 which is used to measure the negative and positive volume flows in a specific security, relative to its price over a period of time. It is a simple measure that keeps a cumulative total of volume by either adding or subtracting each period's volume, depending on the price movement.
Additionally, this goes beyond the basic volume measure. It combines price movement with volume. The logic that this indicator is based on is that volume will precede a price movement.
As such, if a security sees a rising OBV indicator, it is a signal that the volume is growing when there are upward movements in the price. Conversely, when a security is seeing a decreasing OBV, this suggests that its volume is increasing when there are downward movements in price.
The Accumulation/Distribution Indicator is one of the most commonly utilised MT4 indicators for MetaTrader 4. This one looks a little bit like the On Balance Volume indicator. However, it has one crucial distinction. Instead of solely considering the closing price of the security for the period, it also takes into account the trading range for the period.
Therefore, this is believed to provide a more accurate illustration of money flow compared to the OBV. Additionally, the line trending up is a sign of increasing buying pressure, as the instrument is closing the halfway point of the concrete range. In turn, the line trending downward is a sign of increasing selling pressure within the specific security.
Bollinger Bands are one of the best MT4 indicators for Forex traders. It consists of two bands, or lines, which sit two standard deviations below and above a moving average, which appears between the two bands as a line. When the bands widen, this indicates greater volatility, whereas when the bands move closer together, this indicates less volatility.
Market Facilitation Index (BW MFI)
The Market Facilitation Index (BW MFI) is an indicator for MT4 that offers the change in price for a specific tick. The values of this indicator are simply an indicator of change.
When the BW MFI becomes larger and its volume increases, this suggests that traders are opening more positions, the move has begun, and it will begin to pick up pace.
Additionally, this also suggests that the number of traders entering this exact market is increasing. When this indicator falls, the volume does too. This, in turn, means that traders in this market are losing interest.
The BW MFI can rise substantially, however the volume can fall. This suggests that this exact market is not being supported by large amounts of volume from specific traders. In turn, the price will adjust as traders' speculations change.
When the BW MFI falls, but the volume rises, there is an intense battle among bulls and bears. This is characterised by immense buy and sell volume, while the price remains mostly at the same level. This is because the forces are almost equal, resulting in a stable price in that moment. Eventually, one party in this battle wins (bulls or bears). Often, the break will indicate whether the trend will be upheld or if it is ending.
Commodity Channel Index (CCI)
The CCI helps inform traders' decisions to enter a long or a short position. This indicator for MT4 features very little lag, and traders believe it has a high accuracy rate.
The default value for the CCI is 14. The higher the value that is set, the indicator will likely experience more lags, though a smaller number of false trading signals.
This is one of the most popular Forex indicators for MT4, with traders enjoying the fact it shows a direct signal for selling or buying and this is why it makes our list of the best MT4 indicators.
When the CCI crosses upwards through the +100 line, this is considered to be a buy signal. Conversely, when it crosses downwards through -100, it is considered to be a sell signal. There is one key point to remember with this indicator: if the signal contradicts the overall trend of the market, you shouldn't enter a trade. Using trailing stop losses in conjunction with this MT4 indicator can also be a very good risk management strategy.
We hope you have enjoyed our guide about the indicators for MetaTrader 4 and have gained some insight about some of the best MT4 indicators to trade with.
Remember, what qualifies as the best MT4 indicator will vary depending on the situation, trading strategy and your individual trading style. Before using any of these technical indicators on the live markets, it is a good idea to practise first on a demo trading account.
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This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.