Introduction
Do you want to master Forex Trading? If yes, you must use the best technical indicators. There are many free forex indicators available on MT4 to use. These indicators will give crucial insights to traders about market trends, dynamics, and volumes, and enable them to make informed decisions. In this blog, we will tell you about the top 10 free forex indicators to use for MT4. We also guide you in installing and customizing these indicators on your forex trading platform. These MT4 indicators will help you analyze historical data and support the prediction of future market movements.
Understanding Forex Indicators
Forex Indicators are referred to mathematical calculations, that are based on open volume, interest, currency pairs, and exchange rates. Most forex indicators will calculated from the exchange rate of the currency pair. If you want to analyze the currency pair, then the forex indicator will give you easy-to-understand charts, graphs, and bars. Traders can get a lot of benefits by using forex indicators. By using these indicators, traders can determine the right time and the right strategy. With the top forex indicators for MT4, the traders can dive into basic principles and functionalities.
You get a detailed analysis of the forex market by using these indicators. It improves your trading styles and technology and makes your trade worthy. It is suggested that you compare the pros and cons of forex indicators and then choose the best one as per your trading strategy.
Types of Forex indicators
There are different types of forex indicators are available. Every indicator differs in purpose, working, and principles. These indicators use mathematical formulas and give you an analysis of market trends.
Trend Indicators
Forex Trend indicators are indicators that will inform you about market trends. It makes it easier for you to determine the market trends. You can follow the indicator principles, understand market trends, and make an analysis for your forex trade. For example, several ups and downs are made a rule for identifying the uptrend. It is possible to say that when the price reaches above the 100-day average, then it is referred to uptrend.
So, the Trend indicators will provide you with trading signals. It is suggested that traders experiment with trading indicators to get better results. You also need to adjust the lookback period if currency pairs are volatile in the market.
Momentum Indicators:
Momentum Indicators are the easiest technical indicators used to analyze the forex trends. This indicator aims to measure the variation value of currency pair with time. The momentum indicator is a leading indicator that helps you forecast the future price movement. The momentum indicators consist of the relative strength index (RSI) and moving average convergence divergence (MACD).
Volatility Indicators:
The volatility Indicator refers to the severity of price movements and frequency in the underlying market. Volatility is an important price element that helps traders pick a beneficial market to trade in and decide on an investment amount. Volatile markets are lucrative as they are risky for traders. Less volatile markets feature low price activity, and traders can trade with high amounts in this case.
So, these forex indicators will help you to establish the volatility of prices in specific markets. Examples of this indicator are average true range, Bollinger bands, etc.
Volume Indicators:
Volume Indicators are indicators that inform you about the enthusiasm of traders about currency pairs. You have to keep in mind that if you deal with the stock market, then the number of shapes that change hands will considered volume. If you trade with future and options, then the volume is the number of contracts with which you trade. The balance volume indicator ( OBV) helps predict the price of a security through volume changes.
In Forex trading, you will not get entire market volume data. This is the reason why there is no single or central exchange where the currency pairs are traded. The volume indicators will help you to confirm the market trends and determine price breakouts. It appears at the bottom of the chart and is used to indicate the relative levels of trading volume.
Criteria for Selecting Top Indicators
While choosing indicators, you have to consider both the long-term and short-term goals and how each of them will be measured. With several indicators to pick from, finding out the best is tough. Here are a few tips you should follow to choose the best forex indicator
- Match Indicators to Goals – Determine what type of information you want to enhance your trading. Then, pick out indicators that provide that information.
- Use a combination of Indicator Types – Combine trend, momentum & volatility indicators for a complete view of the markets.
- Find Indicators that Complement Each Other – Pick indicators that work together to confirm trading indicators and offer great accuracy.
- Choose Indicators with Different Time Frames – Use signs based on short, medium, and long-term time frames to get multi-dimensional market trends.
- Test Indicators Thoroughly – Demo test indicators under market conditions to understand how they are carried out.
- Start with a Few Indicators – Begin with 2-3 signs that offer the most useful indicators. You can add more later once you are comfortable with indicators.
- Read the Source Code – For customizable indicators, you have to read the supply code so you understand the logic behind the signals.
Top Free Forex Indicators for MT4
Forex Trading is a dynamic and complex market that requires traders to have deep knowledge of currency pairs, market trends, etc. If you want to start trading and make informed decisions, then you should use technical indicators. You have to use the best technical indicators to determine market trends and potential entry and exit points.
MT4 is a famous trading platform among forex traders, and it gives you a range of indicators to boost your trading journey. Here, we will tell you the top free forex indicators for MT4.
Moving Averages (MA)
Moving averages are the most popular indicator used by forex traders. It is easy to use the MA indicator to identify the market trend direction. It helps to help level price action. The basic MA takes the average closing price on a set period and plots it on the chart. When new prices arise, the average recalculates, and again, the plot line along the chart.
How to use Moving averages
- First, determine the longer-term trend with 100-200 MA
- Next, identify short-term trends with 20-50MA
- Next, signals to go long when shorter MA cross to longer MA
- Signals to exit or go for short when shorter MA crosses under long MA
The default settings also work well for your trading, but you can customize Moving averages based on your trading styles and timeframes
Advantages of Moving Averages
Here are the pros of using the Moving averages Forex indicator
Types
The common types of Moving average indicators are simple moving averages ( SMA) and exponential moving averages ( EMA). SMA calculates the average price over the period, whereas the EMA gives more weight to trade prices
TimeFrames
MA is applied to several timeframes, from minutes to months. It fits best to your different trading styles.
Limitations of MA Indicator
Lagging Indicator
Moving averages (MAs) are based on historical statistics, which means that they inherently lag behind modern market costs. This lag can cause delays in recognizing trend adjustments, leading to previous entry or exit points. For example, by the point, a moving average crossover signals a buy, a substantial part of the price movement might also have already happened.
Whipsaw Effect
In volatile or fluctuating markets, moving averages can produce false signals, known as whipsaws. These occur while the prices cross the moving average often, inflicting common and unprofitable trades. This is especially elaborate with shorter-time period moving averages, which are more sensitive to price fluctuations.
Smoothing Issues
While smoothing price data helps filter out noise, it also way that moving averages can miss fast price movements or reversals. This smoothing effect can bring about a lack of essential market data, potentially causing traders to overlook important price action signals or react too slowly to sudden market adjustments.
Relative Strength Index (RSI)
RSI indicator is another free forex indicator that measures the speed and size of price movements in trade. It measures the magnitude of previous price changes and helps you identify oversold or overbought conditions. RSI oscillates between 0 to 100. Here are common trading signals shown by RSI
- Overbought above 70: Potential sell signal
- Oversold below 30: Potential buy signal
Traders are recommended to adjust the lookback period or combine RSI with other indicators to get confirmation on market trends.
How to set RSI on MT4
Here are the tips you should follow to set up RSI on MetaTrader4
- First, open MT4 and choose the chart you want to analyze
- Tap on the ” Insert” option in the top menu, then move to the ” Indicators” option under “Oscillators”, and then click on ” RSI”
- In the RSI setting window, you have to set the period to default 14 and adjust it to fit your trading goals and strategy
- Next, you have to customize the levels to 30 and 70 to indicate overbought and oversold conditions
- Now, you have to apply the RSI indicator, which is shown under your main chart
Bollinger Bands
Bollinger bands are the technical indicator that helps traders assess trading opportunities and price volatility. This indicator was developed in the 1980s, and designed to give you a visual representation of market dynamics. It gives you a clear representation of trade, whether it is oversold, overbought, or trending.
BB indicator consists of three lines, a simple moving average (the middle band), and an upper and lower band. These outer bands contract and expand based on market volatility, and give you insights into the trading environment. Here are the signals shown by the Bollinger bands indicator
- Go long when prices bounce off the lower band
- Go short when the price hits the upper band and drops
- Exit position when price touches the moving averages line
This Bollinger bands indicator works for different trading strategies across timeframes. You can set the default 20 period, but customization is also permissible as per your trading strategies and goals
How to interpret and use Bollinger bands Indicator
Here are the easiest ways to interpret the Bollinger bands and use them in your trading
Bandwidth
The narrow band shows you low volatility and breakout potential. Wide bands show you high volatility and trend continuity potential.
Price touch upper band
If the price touches to upper band, then it shows overbought signals. You have to consider overbought signals for selling if the price reverts to mean.
The price touches the lower band.
Oversold signals appear if the price touches the lower band. It suggests you buy if the price reverts to mean
Price cross middle band ( SMA)
If the price crosses the middle band in the above direction, then it indicates a bullish trend. If the price crosses the middle band in the below direction, then it indicates a bearish trend.
Double Bottoms and tops
You have to look for double bottoms near lower bands or look for double tops near upper bands, referred to as reversal signals.
Best practices to use Bollinger Bands Indicator
Here are the following practices you should use to use Bollinger bands indicator
Trend reversals
It is suggested that traders look at the price tags of bands because they show potential trend reversals to them.
Squeeze
A Bollinger squeeze is when bands come close. It indicates the sharp price movement.
Combination with MA
It is suggested that traders combine the Bollinger bands indicator with MA because it helps identify trends and determine entry/exit points.
You have to use Bollinger bands in trending markets and ranging markets, and you have to use them in combination with other indicators to get efficient results.
MACD (Moving Average Convergence Divergence)
MACD is another best forex indicator that helps investors identify entry points for buying or selling. Helps you to calculate and find the difference between two MAs. It identifies the spot changes in direction, strength, and momentum. It generates buy and sell signals in the following way.
- Buy signal: If the MACD line crosses above the signal line
- Sell signal: If the MACD line crosses below the signal line
MACD works well across all currency pairs and timeframes. It is suggested to customize the fast and slow MA periods to fit your trading strategy
Tips to use MACD effectively
Here are the three ways you can follow to use the MACD indicator and interpret it effectively
Crossover
The first way is Crossover. When the MACD drops under the signal line, then it indicates bearish signals. It shows you a good time to sell. If MACD rises above to signal line, then it indicates bullish signals. It shows you a good time to buy. Many forex traders in the trading world wait for a confirmed crossover signal line to avoid wrong entries in the trading market.
Divergence
Another method to interpret the MACD indicator is Divergence. This is when asset prices diverge from MACD. It indicates the end of the current trend.
Dramatic Rise
The last method for MACD interpretation is Dramatic Rise. This method is used when MACD rises highly. The shorter MA pulls away from the longer-term MA, and it indicates that security is overbought and returns to normal levels.
Limitations of MACD Indicator
Lagging Indicator:
MACD is based on ancient price information, that causes delays in indicating trend adjustments, that could cause late entries or exits in trades.
False Signals:
In unstable or sideways markets, MACD can generate false signals, ensuing in whipsaw trades that may be unprofitable.
Limited in Range-Bound Markets:
MACD is much less effective in range-bound or non-trending markets, wherein it cannot provide clear buy or sell signals, reducing its ordinary real potential.
Complex Interpretation:
Understanding and interpreting more than one element (MACD line, signal line, and histogram) can be tough for novices.
Stochastic Oscillator
A stochastic Oscillator is one of the free momentum indicators, that compares the specific closing price of a security to a range of prices over a period. The sensitivity of the Oscillator to market movements is reduced by adjusting the period or by taking the MA of the result. The stochastic Oscillator indicator is used to generate oversold or overbought trading signals and uses 0-100 bounded values. Here are the signals indicated by the Stochastic Oscillator
- Overbought above 80 signals indicate a drop
- Oversold under 20 signals indicate a rise
How to Interpret the Stochastic Oscillator for Trading
The Stochastic Oscillator indicator is represented as a percentage. If values cross to 80, then the closing price will be near to upper limit of the range. If the value is under 20, then it will be near the lower limit range. Many traders use the Stochastic Oscillator as the best MT4 forex indicator because they obtain different signals from it. Here are the few parameters you should pay close attention to while interpreting the Stochastic Oscillator
- Divergence with trading price curve
- The level of the stochastic lines
- The direction of the lines.
This indicator can signal the reversal and the beginning of a new forex trend. For example, if the main curve is above 80, and makes two peaks, and the price rises, then it shows a bearish trend. The bullish trend occurs when the main curve is under the level of 20
Average True Range (ATR)
The ATR indicator measures market volatility by calculating the average range between the high and low prices over a particular time frame. ATR provides a level of market volatility, helping traders know the potential price movement range and manage their risk levels for that reason.
Using ATR for stop-loss orders allows for adaptive risk control, placing wider stops in risky markets and tighter stops in calmer markets. ATR aids in figuring out appropriate position sizes based on market conditions, making sure there is constant risk exposure no matter various volatility, and as a consequence, retaining a solid risk management approach.
How to use ATR to set stop-loss and take-profit levels
Traders use the ATR to set stop-loss levels and determine the potential profit levels for their trades.
- Calculate ATR: Determine the Average True Range (ATR) price for the needed period on your trading chart.
- Stop-loss level: Set your stop-loss order from the entry point by multiplying the ATR cost. For example, if ATR is 20 pips, place your stop-loss 1.5 examples ATR (30 pips) below the entry for long positions or above for short positions.
- Take-Profit Order: Use more than one of the ATRs to set the take-profit level, making sure of a good risk-to-reward ratio. For example, the goal is 2 or 3 times the ATR cost.
- Fibonacci Retracement Levels
The Fibonacci Retracement levels indicator is based on the Fibonacci series and is used to become aware of support and resistance levels in the market. Traders can use these tools to decide which price is the chance to oppose or maintain its trend. The Fibonacci stages act as potential rate objectives or regions of interest for traders. The most commonly used Fibonacci levels are 38.2%, 50%, and 61.8%. Traders can use these levels to set entry and exit points for their trades.
How to trade with Fibonacci Retracement levels
- Go long if strong bounce off Fibonacci levels in a bullish trend
- Go short if break under Fibonacci levels in a bearish trend
- Take profit at next Fibonacci levels
This indicator works well to analyze the entry and exit points. However, it is suggested to use this indicator with a trend indicator for directional bias.
ADX (Average Directional Index)
The average directional Index ( ADX) is a technical indicator that you should use to determine the strength of the price trend. Trading towards the direction of a strong trend will reduce risks and increase potential. Many traders in forex trading use ADX because of its reliability. ADX quantifies the trend strength. ADX indicator calculations are based on the moving average of price range expansion with time. You can set the default setting to 14 bars but also customize it with time, as per your trading goals and requirements. Here are signals shown by ADX
- ADX above 25 signals build a trend
- ADX above 50 signals show a strong trend
- Failing ADX signals indicate a weakening trend
How to interpret ADX Reading
- Trend Strength: An ADX value above 25 suggests a strong trend, while under 20 shows a susceptible trend.
- Crossovers: When +DI crosses above -DI, it may signal a bullish trend, and vice versa for a bearish trend.
ADX is best to use with other indicators, as it doesn’t offer whole information on its own. It’s perfect for traders looking to combine their trend-based techniques.
Ichimoku Kinko Hyo
The Ichimoku cloud (Ichimoku Kinko Hyo) is a technical indicator that is used to measure momentum with future areas of support and resistance. The Ichimoku Kinko Hyo is composed of 5 lines that make up levels- range. The traces themselves, according to the precept of analysis, are compared with moving averages. The Ichimoku indicator is used to pick out the trend and define the support and resistance ranges, and entry and exit price points.
How to set up and interpret Ichimoku indicators
To Set Up Ichimoku
- Open MT4 and select your chart.
- Click on “Insert” > “Indicators” > “Custom” > “Ichimoku Kinko Hyo.”
To Interpret Ichimoku Signals
- Kumo (Cloud): The area among Senkou Span A and B. Price above the line suggests a bullish trend and below indicates a bearish trend.
- Tenkan-sen (Conversion Line) and Kijun-sen (Base Line): A crossover of the Tenkan-sen above Kijun-sen indicates a buy, and under indicates a sell.
- Chikou Span (Lagging Line): If it crosses above the prices, it indicates a buy; under indicators a sell.
Advantages of Ichimoku in the Forex Market Trading
Here are the benefits of using the Ichimoku indicator
- Comprehensive View: Provides a holistic view of the market, combining trend, assist, and resistance levels in one indicator.
- Trend Identification: Identifies bullish and bearish tendencies, helping traders align with the trading market.
- Reliable Signals: Generates reliable entry and exit signals by the interaction of its additives and reduces fake signals in trending markets.
- Visual Clarity: The visual nature of the Ichimoku makes it easier to identify key levels and potential reversals at a look.
- Multiple Time Frames: Effective across numerous time frames, improving its versatility for extraordinary trading techniques.
Pivot Points
The pivot Points indicator is a technical indicator that helps you to analyze overall market trends. It identifies the potential support and resistance areas. Here are signals shown by pivot points
- Go short when the price breaks under pivot points
- Go long when the price breaks above pivot points
You have to use pivot points with range-bound strategies in short timeframes. It is also suggested to customize pivot point calculation, as per your trading requirement nts
How to calculate and apply pivot points on MT4
Here is the guide you can follow to calculate and apply the pivot point indicator on MT4
Calculate Pivot Points:
- Pivot Point (P): (High + Low + Close) / 3
- Resistance 1 (R1): (2 * P) – Low
- Support 1 (S1): (2 * P) – High
- Resistance 2 (R2): P + (High – Low)
- Support 2 (S2): P – (High – Low)
Apply Pivot Points:
- First, you have to Open MT4, select your chart, and move to “Insert” > “Indicators” > “Custom” > “Pivot Points.”
- Now, enter the calculated pivot points manually or use an automated pivot point indicator.
- The pivot points will shown on your chart and give you key support and resistance levels.
How to Install and Customize Indicators on MT4
Installing and setting up indicators on MetaTrader 4 (MT4) is an easy process. Here’s a step-by-step guide to get you started:
Add an Indicator to the MT4 Platform
- Open Data Folder: In MT4, click on “File” at the top left corner and select “Open Data Folder”.
- Access Indicator Folder: In the data folder, navigate to “MQL4” and then to “Indicators”.
- Copy & Paste Indicator File: Copy the indicator data (typically a .Mq4 or .Ex4 document) you want to feature.
- Paste into the “Indicators” Folder: Paste the copied data into the “Indicators” folder.
- Reload MT4: Close and reopen MT4 to load the new indicator.
Add the Indicator to a Chart
- Open the “Insert” Menu: Click on “Insert” on the top of the MT4 platform.
- Navigate to “Indicators”: Select “Indicators” from the dropdown menu.
- Choose the Indicator: From the listing, pick the indicator you need to add. You can also drag and drop the indicator from the “Navigator” window in your chart.
Adjust Indicator Settings
- Access Indicator Settings: Press “Ctrl+I” on your keyboard to open the “Indicators List” window.
- Select the Indicator: Click on the indicator you want to customize and click on “Edit”.
- Customize Settings: In the settings window, you may modify the various parameters like size, colors, and levels as per your needs.
By following these steps, you can easily install, practice, and customize indicators in MT4, tailoring them to suit your trading strategy. Remember, while indicators are effective tools, they have to be used as a part of a comprehensive trading plan.
Best Practices for Using Forex Indicators
To use MT4 Forex indicators properly, traders need to know their strengths and barriers. Here are some tips for using indicators in your trading
- Combine indicators: Using more than one indicator can offer a more comprehensive view of the market. Combining exclusive varieties of indicators, along with a trend indicator and an oscillator, can assist confirm signals and filter false signals.
- Backtest indicators: Before the usage of a trademark in live trading, it’s suggested to backtest the usage of ancient data. This permits traders to assess the indicator’s overall performance and decide its effectiveness in different market situations. Understand market context: Indicators have to not be used in isolation. Traders need to remember the general market context, such as basic elements and market sentiment, while decoding indicator signals.
- Practice risk management: Indicators can provide valuable insights, but they’re not foolproof. Traders must usually use the right risk management strategies, along with putting stop-loss orders and handling position size, to protect their capital.
Conclusion
MetaTrader4 platform offers a huge range of Forex indicators that may assist traders in making informed trading decisions. The Moving Average, Relative Strength Index, Bollinger Bands, MACD, and Fibonacci Retracements are the various top indicators used by forex traders. Each indicator has its particular advantages and can be used with different indicators to enhance trading accuracy. Traders need to know the way to use these indicators efficiently and use them in their trading techniques. By doing so, traders can increase their chances of success in the forex market.
