When trading in the Forex markets, there are a lot of things that need to be considered. We need to select a broker to trade with, strategies to use, currencies to trade, etc.
Traders can use fundamental analysis or technical analysis to plan their trades. When trading technically, one of the most important things that traders need to consider is the indicators they plan on using. Selecting Forex market best mt4 indicators is not easy, as there are plenty of indicators to choose from.
Each indicator should be used in a specific way. There’s no such thing as an indicator that works best in all market conditions. Some indicators are built for trading trends, while others perform better in ranging markets.
We have decided to go over some of the best MT4 Forex indicators to showcase their strength and weaknesses, as well as how they work and when to use them. Without further ado, let’s take a look at the best Forex indicators to use in MetaTrader 4 platform.
Relative Strength Index
Relative Strength Index (RSI) as the name suggests is a momentum-based indicator that measures the strength of the asset. It is a lagging oscillator that looks at the asset and determines whether it is oversold or overbought.
When using the RSI indicator in MT4, the indicator will be plotted below the chart as a single line that moves on a scale of 0 to 100. This scale is then used in determining if the asset is overbought or oversold. If the RSI indicator goes over the 70 mark, it signals that the asset is overbought, while if it falls below 30, it means that there is selling pressure and the asset is greatly oversold. This information is then used to determine the plan of action and what kind of trades to make. If the asset goes over 70, it signals that the market is bullish and traders might consider opening long positions, while if the asset is oversold and is below 30, it might be best to open short positions. But here, traders also need to consider how much are these assets oversold and overbought. Each currency pair has a historical average of oversold and overbought marks where they tend to reverse, and this can be used as signal lines of when to exit the market or open the opposite position trades.
Now, let’s take a look at the best mt4 indicators examples by taking a look at the RSI indicator in MT4. In this example, we are trading with EUR/USD currency pair using the RSI indicator. As we can see in the chart below, once the RSI went over the 70 mark, the asset went on a bullish run and started to gain value. It continued like that up until the 89 mark, which is around when usually EUR/USD reverses when using RSI, and as we can see the prices started to fall as the market reversed its direction. Looking at the red arrows, we can see where was the best place to open the position and when we were supposed to close it.
Moving Average Convergence Divergence or MACD for shorts is another indicator that can be considered one of the FX MT4 the best indicators. It is a trend-following indicator that showcases the direction of the trend and possible reversal points. Just like the aforementioned RSI, MACD is an oscillator that sits below the chart on the histogram and moves in relation to the 0-mark line. MACD is calculated by subtracting two EMAs from each other and the resulting number is our moving average convergence divergence, and the most command EMAs that are used are 12-period EMA and 26-period EMA, with the latter being subtracted from the first.
As we mentioned MACD moves up and down of 0-mark line, and as we are subtracting 2 EMAs from each other negative MACD can be easily seen when trading. If we see that MACD has fallen below the 0 line, it usually means that the market is in a downtrend, and if it goes above the 0 line it means that the market is growing. But this is relatively inaccurate data that can not be trusted blindly, therefore traders also implement 9-period EMA on their charts and use it as a signal line. When we see that MACD has gone over the signal line, it signals a possible bullish run, while if MACD is below the signal line there is an ongoing downtrend on the market. For upcoming trend reversals, we can look at the histogram and bars represented on it. If we see that bars that sit on top of the histogram are shrinking and moving closer to the 0 line, it means that the trend reversal has started from bullish to bearish. If these bars seat below the histogram, and they are moving towards the 0 line, this means that we have a bearish to bullish reversal.
Now let’s take a look at the example of the MACD indicator in Forex trading. In this example, we are trading with EUR/USD currency pairs using the MACD indicator. As we can see in the chart below, when the signal line (green) started to rise, it was followed by the rise of the MACD indicator, and it eventually went above it. When this happened, prices started to rise and EUR/USD pair went on a bullish run. This is an easy indicator to use which also has good accuracy, therefore making it one of the best MT4 indicators 2022.
Another simple yet powerful indicator that traders can use when trading on MT4 is the Awesome Oscillator. It is a technical indicator that is used for confirming and disproving ongoing trends in the market using Simple Moving Averages. Being an oscillator, it seats below the charts and showcases the strength of ongoing trends using bars. Awesome Oscillator is calculated by subtracting 32-period SMA from 5-period SMA and placing the resulting number on the histogram below the chart. This histogram then creates mountain-like bars, where green bars represent the Awesome Oscillator showing growth compared to a previous period, while red bars signal that the Awesome Oscillator is shrinking. We can use this as two separate signals, the first is when the Awesome Oscillator changes the direction and color of its bars. And the second signal is when the Awesome Oscillator crosses the centerline and goes from positive to negative or vice versa.
When using Awesome Oscillator in Forex trading, traders can simply look at this change of direction and crossover of Awesome Oscillator and neckline and make their trading decisions based on that. If we see that Awesome Oscillator has fallen below the neckline, it means that we might have a short-term bearish run on our hands, and if it goes over the neckline it means that we are in a bullish market.
But relying on just that might not be enough, so traders have come up with a strategy called Twin Peaks. When using this strategy, traders simply need to look for MACD patterns and peaks formed by MACD bars. When we see that there are two peaks side by side, it usually means that trend reversal is likely to happen, and we should be ready to take full advantage of the situation. For the pattern to be considered a Twin Peak, the second peak should be smaller than the first one, and the Awesome Oscillator should not have crossed the neckline in between these peaks. We can see the example of Twin Peaks in the image below.
Ichimoku Cloud, or Ichimoku for short, is a combination of different technical indicators that are put together to create one big technical indicator. When using the Ichimoku indicator, traders receive information about support and resistance levels, as well as the strength and momentum of an asset. Using this indicator might seem complex, as it plots weird shaped forms (Clouds) on the chart, and beginner traders might get overwhelmed by the amount of information displayed.
The reason as to why Ichimoku Cloud is one of the best MT4 indicators in Forex is that traders who master this indicator can analyze the market with just one glance. It consists of multiple indicators, and the data provided is massive. For example, when looking at the price of an asset on the charts, if price seats above the Ichimoku cloud it means that there is an uptrend. When it is located below the cloud we have a downtrend, meanwhile, if the price is within the cloud market is ranging. The color of the Ichimoku Cloud is also important. It is based on whether leading span A is located above or below the leading span B. The indicator can also provide us with support and resistance levels.
For better clarity, let’s take a look at the example of Ichimoku Cloud in Forex trading. In the chart image below, we are trading the EUR/USD currency pairs using Ichimoku Cloud as an indicator. As we can see, when the price went above the Ichimoku Cloud (red and yellow dotted lines), EUR/USD started to trend upwards. This is where most traders would have opened long positions or closed open sell positions. This is just a simple example, and to learn more about Ichimoku Cloud, you can read our guide on Ichimoku Cloud.
Another great Forex indicator for the MT4 platform is Pivot Points indicator. This is a technical indicator that provides traders with support and resistance levels, which then can be used to analyze the state of the market and the direction of the trend. When calculating Pivot Points, traders look at the High, Low, and Closing prices of an asset from the previous trading session and calculate multiple support and resistance levels.
Unlike every other indicator mentioned above, Pivot Points are static, meaning that they don’t change throughout the day, and they change only when a new session begins. When using Pivot Points, we will see 5-7 lines plotted on top of the chart, where the middle line is the Pivot Point and the lines below and above it are support and resistance levels. When trading with this indicator, traders usually are looking for breakouts that happen throughout the day, and also crossovers between the price of an asset and the Pivot Point itself. If we see that price is above the Pivot Point, it means that there is a bullish run, while if the price falls below the Pivot Point, it means that the market is bearish. This information is then taken and using support and resistance levels, traders open smart orders, with take-profit and stop-loss orders. Some traders are also looking for breakouts to happen and when it does, they try to capitalize on the trend that is about to start or has already started.
Here we will take a look at the example of using Pivot Points when trading. On the EUR/USD chart, we can see that price has been on a downward trend. Price has broken the support level (red line) but then it picked up momentum and once it crossed the Pivot Point (orange line) and prices started to rise. Once this happened, traders could have opened long positions and taken out their profits near the three resistance levels (green lines), with the ones who kept their position open the longest taking out the most profits.
The main takeaways
Some of the Forex trading best mt4 indicators are: the Relative Strength Index (RSI), MACD, Awesome Oscillator, Ichimoku Cloud, and Pivot Points. Keep in mind that each indicator should be applied in a suitable market conditions.
MetaTrader 4 is the most popular Forex trading platform. And it is important to know which indicators are the best to use when trading with MT4. The indicators will help you to create better trading strategies, improve planning process and have a profitable trading experience.
FAQs on best MT4 indicators
Do the best MT4 indicators really work in Forex?
Yes, they work really well in Forex. However, keep in mind that an indicator to produce reliable trading signals, it should be used in a specific market conditions. Oscillators are best for trading ranges, while moving average indicators are for trading trends. Volume indicators help locate entry and exist, and they can also help predict whether breakout will happen or not. Some of the best mt4 indicators Forex traders use are: the Relative Strength Index (RSI), MACD, Awesome Oscillator, Ichimoku Cloud, and Pivot Points.
Are the best MT4 Forex indicators accurate?
It depends on how you use your indicators. Each indicator is created to help trade specific market conditions. What’s more, the accuracy also depends on the asset we are trading. Some assets that have low liquidity, for instance exotic currency pairs, will be unsuitable for intraday traders due to high spreads no matter which indicators we use. In addition, it’s important to note that every technical indicator has a weakness. Indicators fail to incorporate fundamentals in their analysis, which is why it’s recommended for technical traders to keep an eye on the economic calendar.
Are the best MT4 indicators worth trying?
Yes. However, keep in mind that every trader is unique. The trading strategy that works for other traders might not work for you, which is why you should test the trading strategies and indicators in demo account. And the indicators we have recommended in this guide are definitely worth testing.