How to use MT4 indicators

MetaTrader 4 (MT4) is undeniably one of the most popular and widely used trading platforms worldwide. It’s hardly surprising if one considers its ease of use, innovative features, and advanced technical analysis tools. It’s also an appealing option among global traders because of its diverse indicator options. So much so that MT4 remains a go to platform for beginner traders and professionals alike.

What are MT4 indicators?

MetaTrader 4 indicators are mathematical tools. They are used to perform historical price data analysis and then to present that data in the trader’s performed visual format. Indicators are a vital part of technical analysis as they provide crucial insights into market trends, price action, momentum, volatility, and possible turning points.

MetaTrader 4 in particular offers 30 built-in indicators, over 2k free custom indicators and 700 paid ones. These give the trader the ability to conduct even the most complex market analysis to make trading decisions. Some of the most popular MT4 indicators include:

• Bollinger Bands: a momentum indicator that helps determine the volatility of different financial instruments to establish if they are over or undervalued.
• MACD (moving average convergence divergence): helps traders identify price trends, measure the momentum of a trend, and identify entry points for buying or selling.
• RSI (Relative Strength Index): another momentum indicator that measures the extent of recent price changes to assess overbought or oversold conditions.
• Moving Average: this indicator helps level price action by filtering out noise from random price fluctuations.
• Ichimoku Cloud: show support and resistance levels and momentum and trend direction.
• Awesome Oscillator: this indicator is utilised to confirm or disprove trends on price charts.
• Stochastic Oscillator: compares an asset’s closing price to a range of its prices over a specific window of time.
• Average True Range: this indicator is used to measure market volatility by calculating the average range between the high and low prices over a specific period.
• Momentum (Momentum): refers to the tendency of a price trend to persist in either an upward or downward direction for a specific period of time, typically considering both price and volume data.

This is by no means an exhaustive list of indicators but certainly some of the more widely used. While indicators may be used alone, traders are likely to use a combination of two or more to build more comprehensive trading strategies and for more accurate analysis.

How are indicators added in MetaTrader 4?

The process to add MT4 indicators is relatively simple. The first thing is to do is access the platform and load the chart you want to use. You do this by selecting the chart and then navigating to the INSERT menu at the top of the platform window. From there, hover your cursor over the INDICATORS option where you will see the indicators categorised into groups.

Once you’ve chosen the indicator you want, set its parameters. This includes the period of the indicator, the price data it will use, and the way in which the lines will appear on the chart. Upon pressing okay, the indicator will appear on your chart. MT4 also accommodates more than one indicator on a single chart to acquire a more comprehensive view of the market.

Modifying MT4 indicators is straightforward too. The trader simply has to select the indicator they want to modify, click on the EDIT button to change the parameters or adjust the visual appearance (e.g. colour or thickness of the line) and then press OK.

Adding custom indicators

In addition to built-in indicators, MetaTrader 4 also accommodates custom indicators. Traders may opt to use these to develop customised trading strategies. To add a custom indicator, you will be required to download the indicator file which will be in either .mq4 or .ex4 format.

Once downloaded, open MT4 and go to File > Open Data Folder. In the data folder, navigate to MQL4 > Indicators and copy the downloaded indicator file into this folder. Once you restart MT4, the custom indicator will appear in the Custom Indicators section of the Navigator panel.

Risk management techniques

No MT4 indicator is foolproof and errors occur. In order to safeguard their funds, traders will look to implement risk management techniques. These vary from trader to trader but may include:

• Stop-loss orders. Probably one of the most popular risk management tools, regardless of the asset being traded or the trading approach being used. The order is triggered when a financial instrument reaches a specific price, and the market looks to be moving in an adverse direction. Its purpose is to limit any potential losses.  
• Take-profit orders. Also incredibly popular, take-profit orders are triggered when a pre-established price level is reached. The goal is to capture profits.
• Position sizing: this technique will see the trader avoiding risking more than a particular amount on a single trade. In that way, should the trade perform poorly, the trader is not at risk of losing all of their capital, but rather a smaller percentage thereof.
• Portfolio diversification: using this approach, a trader will look at executing trades on different assets in different industries or geographies. This ensures risk is spread, so that if one asset or sector performs badly, the trader can fall back on the other assets or sectors they’ve invested in.
• Building a trading plan: a building plan is a great way to keep you disciplined and focused. This is because it structures the way in which you will execute your trades. It will include the goals that you’re hoping to achieve and the rules that you will follow to achieve those goals. It will specify your budget and the amount of risk you’re willing to take on to avoid losing all of that budget. The trading plan will also integrate your risk management strategy so that you have in place the measures needed to protect your funds as best you can.
• Managing your emotions: an effective trading plan is also one that helps you manage the feelings that navigating the financial markets evokes. The most common are stress, anxiety, and fear. Also usual are feelings like greed, arrogance of FOMO. Not having a good handle over these feelings is likely to lead to emotive trading, which in turn often results in poor trading outcomes.  By sticking to a plan, and coupling it with mindfulness practices, you’ll be better able to push emotions aside and instead, focus on making decisions based on sound logic and analysis.

Master Trading Fundamentals with MT4

One of the most vital components of trading lies with investing time in ongoing learning to ensure you know everything you can about the indicators you’ll use, the markets you’ll trade in, and the risk management techniques you’ll adopt. Learning resources come in many formats, be they blogs, articles, videos, seminars, webinars, etc, all of which offer critical insights into different aspects of trading. Most reputable brokers will offer a mix of these resources to their traders to boost their skill and expertise.

Trading with IronFX

Register with award-winning IronFX and enjoy a high quality, flexible trading experience, a range of tradable assets, multiple account types, and quick and easy trade execution. You’ll also be able to enjoy fast withdrawals and deposits, and market access via the MetaTrader 4 (MT4) trading platform, arguably one of the world’s most popular trading systems amongst global traders. The IronFX Academy also offers an abundant source of educational resources to boost one’s skills and acquire fundamental trading insights.

Disclaimer: This information is not considered as investment advice or an investment recommendation, but instead a marketing communication. IronFX is not responsible for any data or information provided by third parties referenced, or hyperlinked, in this communication.