Technical analysis is incredibly important for Forex trading: you can use it to predict price movements and increase the effectiveness of your trades. However, the accuracy of your predictions depends on which indicators you choose and how you use them. That means you should always choose the ones most suitable for your trading strategy. In this article, we tell you about several useful MT4 indicators, explain how they work, and help you choose the right one for you among them.
MACD, or Moving Average Convergence/Divergence, is a very simple and useful indicator especially suitable for novice traders. It’s calculated by subtracting the 26-period EMA from the 12-period EMA where EMA stands for Exponential Moving Average. Then, the 9-period EMA is added to function as the signal line. While that may sound rather complex, using this indicator is simple: if the main MACD line is above the signal line, that’s a signal to buy the asset. If it’s below, sell the asset. If MACD and the price are diverging, that means the trend is over.
OBV is arguably the best MT4 indicator for beginners. The metric uses volume flow to predict sudden price changes based on the idea that such changes are often preceded by a surge in volume. It adds the current volume to the previous value when the price is on the rise and subtracts it when the price falls below yesterday’s closing price. On Balance Volume can be used to follow and confirm trends or to look for divergences between price and volume movements.
RSI stands for Relative Strength Index. This indicator allows you to find overvalued and undervalued assets. The metric is displayed as a simple line graph that goes from 0 to 100. Reading the graph is not too difficult: when it goes above 70, the asset is overbought. When it goes below 30, the asset is oversold. The indicator can also be used to predict a trend reversal, but its main downside is that it’s known to produce many false signals.
MA, or Moving Average, is a basic indicator used to determine the direction of a trend. It allows you to smooth out price movements to see trends more clearly. MA is a simple indicator that’s pretty easy to interpret, but it has its downsides: the metrics requires at least some historical data to work properly, and it’s blind to cyclic fluctuations or fundamental factors lying outside of the market itself.