A technical indicator is a mathematical calculation based on historic price and/or volume that helps you forecast future market direction. Technical indicators are a huge benefit to traders, particularly if you have a nice charting package like the MT4 platform. Our team at TradeForexSA has put a great deal of time into developing an Advanced Trading Strategy section that incorporates some of the MT4 indicators.
Technical indicators fall into two categories:
- Trending indicators. Example: Moving Averages, which can help you to identify the market trend.
- Oscillators. Example: Stochastic indicator, which helps you assess the strength of the trend and to find turning points in the market.
A technical indicator can be a great tool to help you decide when to enter and exit your trade. You’ll have to only choose those technical indicators that make sense to you and the ones that suit your trading style.
How to Apply a Technical Indicator
The MT4 terminal offers you multiple ways to apply your favorite technical indicator on a price chart. The easiest way to impose a technical indicator on the chart is to press the button on the chart toolbar and call the indicators sub-menu from where you can choose your favorite technical indicator. Usually, if it’s an oscillator indicator it will appear in a separate indicator window inside the chart window.
A second option to apply a technical indicator on the chart is to simply drag-and-drop your favorite indicator from the navigator window onto the chart. If you choose a trending indicator like a Moving Average this will be applied directly to the price chart.
As a last option, you can access the indicators library directly from the Main Menu. Simply go to Menu –> Insert –> Indicators and choose your preferred technical indicator.
The process to manually install a technical indicator is quite simple. Firstly, you want to locate the installation files on your MetaTrade4 platform. In order to locate and have access to the file folder where we’re going to copy and install our technical indicator directly to your MT4 platform–> File–> Open Data Folder. Locate the MQL4 and Indicator folder where all the indicators are stored and copy your indicator there.
After installation is completed, you’ll have to restart the MT4 platform in order for the technical indicator to be viewable on your MetaTrader4 platform. It’s important to always restart after installing the technical indicator, so the MT4 can recognize the new file you just installed.
All indicators have settings and parameters that can be changed.When you apply an indicator you can modify the settings according to your own trading needs. Usually, on the MT4 terminal, when you try to attach an indicator on a price chart a new window with the indicator settings will pop up.
For the purpose of this tutorial, we have chosen the RSI indicator to exemplify what type of settings are available to you:
- Period: These is the analytical parameters based on which your technical indicator will be calculated on.
- Apply to: You need a price reference for which your indicator parameters are applied to. You can choose between, the High, Low, Open, Close Median prices and Weighted close.
- Style: You can choose your preferred color for various elements coupled with the size and the thickness of the indicator lines.
Under the “Levels” tab you can choose more from the indicator settings, which will vary from one indicator to another. Since the RSI is a momentum indicator you have only the 30 and 70 levels as the standard RSI overbought and oversold levels
Under the “Visualization” tab you can change which timeframes the indicator to be visible on, and on which timeframes the indicator to be hidden.
Alternatively, you can double-click on the indicator to access the indicator settings. As a third option you can access the indicator settings from the top menu: Charts–> Indicators List –> select your preferred technical indicator and click “Edit.” To remove an indicator, you simply have to click on “delete” and this will delete the selected indicator from your price chart.
Next lesson will teach you about Profiles and Templates.