Did you know that there are more than 2000 custom indicators available for MetaTrader platforms?
MQL boasts an extensive library of custom trading indicators for MetaTrader 4 (MT4) and MetaTrader 5 (MT5).
In this guide, we’ll break down some of the best MetaTrader indicators you can use for trading.
What are indicators?
First, let’s start with what indicators are.
Indicators are tools that provide you with a better understanding of what’s going on in the market and forecast where the price will go next.
Indicators are used in technical analysis to discover trends and past price performance of an item. These are essential aspects of every effective trading strategy, and depending on the right ones is a must if you want to be successful consistently.
Indicators can help you grasp and interpret key information via bars, charts, and graphs if you want to analyse any trading instrument.
Although indicators are useful, they are a perfect example of the old saying “a tool for every trade and a trade for every tool.” Certain indicators are only effective for specific periods and trading methods; no indicator will provide actionable information in every trading situation.
While they aren’t a certain way to succeed, they are incredibly useful in detecting trade signals and acting on them quickly.
Best MetaTrader indicators
Now that you know, what indicators are, let’s move to our main part telling you what the best MetaTrader indicators are. Here’s a list of the top 5 indicators you can use in your trading strategies.
1. Moving Averages
A moving average (MA) is a popular technical indicator for smoothing out price patterns by removing “noise” from short-term price changes. The average is calculated over a given time frame, such as nine days, 20 days, or 50 days.
To get a basic notion of which way the price is trending, look at the direction of the moving average. The price is generally rising if it is pointed up. If it’s inclined down, the price is falling.
A moving average can also serve as resistance or support. The average works as a floor (support) in an uptrend; thus, the price rebounds up off of it. Conversely, a moving average can act as resistance in a downturn; like a ceiling, the price hits the level and then begins to fall again.
There are two main moving averages; SMA (simple moving average) and EMA (exponential moving average).
There is no such thing as a superior MA. The time frame for a moving average you choose has a huge effect on how successful it is.
2. MACD
MACD, aka Moving Average Convergence Divergence is one of the most often used indicators. It’s a trend-following momentum indicator that shows the correlation between two price-moving averages.
The MACD occurs by subtracting the 26-period from the 12-period Exponential Moving Average (EMA). On top of the MACD, a 9-period EMA (known as the signal line) is drawn, which acts as a trigger for buy and signals.
When the MACD is above zero, it means that the short-term average is higher than the long-term average. It suggests that things are moving in the right way. When the MACD is below zero, the opposite is true. This zero line is frequently used as a support and resistance region for this indicator.
Traders frequently look for a movement under or above the zero line because it tells them how the short-term average position compares to the long-term average position.
To avoid opening a position early, most traders wait for a confirmed cross over the signal line before taking a position.
3. RSI
- Welles Wilder developed the Relative Strength Index (RSI), a momentum oscillator that analyses the rate and change of market movements. The RSI fluctuates between 0 and 100.
When the RSI goes over the horizontal 30 levels, it is considered a bullish signal. On the other hand, if the RSI falls below the 70 levels, it is a bearish signal.
The RSI stays in the 40 to 90 range during an upswing or bull market, with the 40-50 zone functioning as support. Conversely, RSI tends to stay between 10 and 60 during a decline or bear market, with the 50-60 zone acting as resistance.
These rules can help you analyse the strength of a trend and identify potential reversals.
If the RSI fails to hit 70 on several consecutive price movements during an uptrend but eventually falls below 30, the trend has weakened and is reversing lower.
4. Bollinger Bands
Bollinger Bands were developed by renowned technical trader John Bollinger to help traders uncover opportunities that increase their chances of correctly detecting whether an asset is oversold or overbought.
The Bollinger Bands indicator composes two bands, or lines, two standard deviations below and above a moving average that appears as a line between the two bands.
The indicator’s primary idea is that the closer prices go to the upper band, the more overbought the market is. Conversely, the closer prices get to the lower band, the more oversold the market is.
The core concept of Bollinger Bands is the squeeze. The squeeze occurs when the bands close in on each other, limiting the moving average. It indicates a time of low volatility and acts as a possible signal for rising volatility.
5. Stochastics
The Stochastic is a technical indicator that compares an asset’s most recent closing price to its highest and lowest values over a given period.
It oscillates between 0 and 100, just as the RSI. When the stochastic value exceeds 80, it indicates an overbought condition. Market oversold conditions surface when readings are below 20.
When the oscillator reading rises over 80 and subsequently falls below 80, a sell signal emerges. When the oscillator swings below 20 and then returns above 20, it indicates a buy signal.
Bottom line
So, there you have it. These five indicators are the best MetaTrader indictors you can use for trading strategies.
Although indicators are not perfect, they can certainly give you a heads up, so you can take your positions accordingly.
