Top 5 MT4 Indicators for Beginner Traders
The trading platform MetaTrader 4 (MT4) is one of the most popular trading platforms for novice traders because of its simplicity and extensive toolkit.
But since there are so many MT4 indicators that we can pick from, you can get overwhelmed with how to pick one that will work best for you. The right indicators can make your life easier, but you must be aware of the risks that come with trading, especially in volatile markets.
MT4 Indicators
Below are our top 5 MT4 indicators that traders use to make their trading decisions. But, you will also learn the risks and how to limit them.
Finally, by the end, you’ll have a good overview of how to exploit these indicators for a better trading system without succumbing to common traps.
Market Report
In October 2024, markets worldwide are still quite volatile for several reasons. The US Dollar continues to struggle with inflation worries, which have resulted in wildly volatile prices for major Forex pairs such as EUR/USD and GBP/USD.
Central banks in Europe and the US also raised interest rates, introducing instability that has made traders unable to predict short-term markets. Stock markets have in turn been rattled with wavy corporate earnings, especially in the tech space, on the S&P 500 and Nasdaq 100.
On commodities, oil prices jumped as OPEC extended its production cuts and has had a global impact on energy stocks and inflation expectations.
Typically a haven metal, gold has been relatively flat and experienced temporary upswings as a result of geopolitical factors, particularly in the Middle East. Crypto markets, Bitcoin notwithstanding, have also displayed extreme swings, spurred on by announcements of regulations and new technology.
As the world remains uneasy, the market is teeming with dangers for experienced and inexperienced traders alike. Coin markets, moreover, are characterized by high levels of volatility as central banks fight to keep inflation under control and out of recession.
Traders have to tread carefully in this environment, where good markets can easily come undone in response to unanticipated incidents or policy announcements.
In 2023, for example, the failure of a large crypto exchange caused massive dropouts, showing just how unstable markets can be. There’s something about the approach to trading that allows for some degree of both opportunity and danger.
Top 5 MT4 Indicators
- MT4 Indicators – Moving Averages: Easy and Strong Trading Indicators for MT4
Moving averages are one of the most commonly traded MT4 indicators and are used by many people, not only beginners. This one smooths the price data to give traders an idea of the overall momentum of a market – up, down, sideways.
For instance, when markets are more volatile, like the fall of the dollar against the euro in 2023, moving averages can reveal longer-term patterns while short-term movements can be less evident. Moving averages are great for trends but sometimes move slower than the price, which makes for late entry or exit.
Recommended for: Trend finding.
Dangers – Being late on the trend may cost you the opportunity.
How to use it: You can choose a fixed interval (say 50 days) for your moving average to correct for the price movement and determine the trend of the market.
- MT4 Indicators – RSI: A Balancer Between Overbought and Oversold Prices.
Relative Strength Index (RSI) is one of the most well-known MT4 indicators traders use to identify overbought or oversold in the market. This is especially handy for beginners trying to spot potential reversal lines. But it can also be dangerous to rely on just RSI since it is not reflective of market trends.
RSI traders trading the GBP/USD pair in 2024 took advantage of when the indicator dropped below 30, which indicates oversold. But in the case of economic instability (Bank of England rate increases, etc), the market continued its fall even when RSI reached oversold levels.
This shows that RSI should be used with other indicators as an aid in not reading the market too far.
Avg for: Catching market reversals/indicators.
Dangers: Can produce false signals with high trends.
What to use it for: You will see an RSI over 70 (overbought) or below 30 (oversold) to know how to get in and out.
- Market Corrections with Fibonacci Retracement: How to Embrace Them?
The best support and resistance levels on MT4 are Fibonacci retracement levels. They come from the Fibonacci intervals and are used to retrace possible price action in case the market takes an extreme dip.
In 2024, participants observed the EUR/USD pair came back to the 61.8% Fibonacci resistance level following a big upswing and presented an opportunity to trade short.
Fibonacci retracement can be useful, but bear in mind that no indicator guarantees the price action. Instability in the markets, such as the policy decision of a central bank, can drive prices far outside of expectations for retracement.
Perfect for: Seeing support and resistance levels.
Caution: In some situations, the price could be broken above Fibonacci levels.
What to use it for: Use Fibonacci retracement after a major move to look for reversal signals.
- MACD: A Momentum and Trend Indicator to Steer Away From Harsh Risk Trading.
Moving Average Convergence Divergence (MACD) is a versatile MT4 indicator for trend strength and momentum. Traders like MACD because you can see the connection between two moving averages of a price.
In 2023, MACD proved a great tool for traders working with cryptocurrency’s high volatility, as MACD and signal line overlaps allowed us to track market moves. But, keep in mind, that MACD is likely to throw out false signals when it consolidates, which could bring losses if traders use it too much.
Best for: Trend and momentum detecting.
How to Use It: Look for crossovers of MACD and signal lines for buy or sell signals.
- Bollinger Bands: Viewing Trader’s Volatility in Real-Time.
The use of Bollinger Bands helps to manage volatility during a market downturn. Such bands expand and contract with market movement to help traders predict breakouts or reverses.
Oil traders in 2024, for instance, saw the Bollinger Bands widen on the eve of a dramatic price rise due to OPEC production reductions. But traders must note that markets can go on volatile longer than expected and BVs might not indicate exact entry and exit timing.
Applicable for: Track volatility of the market.
Liability: The time of breakouts is hard to estimate.
Using it: Look for the breakout or reversal at the high and low band of the trade price.
MT4 Indicators – Best Practices and Risks of Trading
The MT4 indicator can help traders make better decisions, but you should never assume the indicator is foolproof. The following are some best practices and risks for traders to know about:
- Always Use Multiple Indicators: You can use several different MT4 signals to visualize the market, such as moving averages and RSI. However, there is an overload of data and poor decision-making in the case of using too many indicators.
- Be Stay Ahead: Stay updated with market information from trusted sources such as Reuters. A geopolitical crisis or economic news can reshape the market with a snap and render your MT4 indicators useless.
3. Risk Management: Keep your capital protected by using stop-loss orders. Forex markets are very dynamic and, if traders do not manage risk, the result can be massive losses.
- Do Not Overtrade: Recall indicators such as RSI and MACD are subject to recurring alerts. Yet, trading too often can increase transaction costs and risk of loss.
VPTrade is a secure, intuitive trading platform that fully supports MT4. VPTrade is the platform traders use because of the features and tools, like advanced charting, asset classes, and real-time feeds.
- All-in-One Tools: VPTrade offers a complete range of MT4 indicators suitable for every level trader so you always have what you need to take on risky markets.
- Study Guide: Access tutorials, webinars, and articles on using MT4 indicators effectively.
- Risk Management Functions: The VPTrade platform has such functions as guaranteed stop-loss orders, which will reduce the risk of trading volatile markets.
Trading can be rewarding, but there are also risks. So traders, with the proper platform such as VPTrade and appropriate MT4 indicators, can deal better with those risks while improving their trading experience.
Disclaimer:
The information presented herein has been prepared by VPTrade and does not intend to constitute Investment Advice. The Information herein is provided as a general marketing communication for information purposes only.
Materials, analysis, and opinions contained, referenced, or provided herein are intended solely for informational and educational purposes. Personal Opinion of the Author does not represent and should not be construed as a statement, or an investment advice made by. Recipients of this information should not rely solely on it and should do their research/analysis. Indiscriminate reliance on demonstrational or informational materials may lead to losses. Past performance and forecasts are not reliable indicators of future results
Therefore, VPTrade shall not accept any responsibility for any losses of traders due to the use and the content of the information presented herein.
