One of the useful and most common analyses for forex traders is technical analysis, which is centered on the evaluation of past market data to detect the possible upcoming market behavior. Technical analysis involves the use of several tools and is often related to the application of indicators, especially the MT4 indicator (MetaTrader 4 indicator).
Why MetaTrader 4?
MetaTrader 4 has a wide range of capabilities for Forex brokers or traders. It is suitable for all categories of traders – whether you are a starter, a professional trader, or even an expert. Asides the fact that the MT4 platform supports standard technical indicators; it also supports custom indicators which can be shared by the users. Those custom indicators are transcribed in form of MQL4 programming language – and the majority of them are free MT4 indicators.
We will now discuss the best working indicator suitable for the MT4 trading platform. It can boost your trading experience and enable you to carry out the technical analysis;
The MACD (Moving Average Convergence Divergence) indicator is classified as an MT4 trend indicator – precisely a trend-following momentum indicator. It shows the connection between two moving average prices. The technique of calculating the MACD is simple – all you need to do is to find the subtraction between the 26-day Exponential Moving Average (EMA) and the 12 days EMA. Furthermore, a 9-day EMA of the MACD (commonly referred to as the signal line) is then mapped on the MACD, working as a trigger for sell and buy signals.
Technically, the MACD can be interpreted in three ways:
The first one is ‘Crossovers’. Anytime the MACD moves downward the signal line, it signifies a bearish signal that reveals that the appropriate time to sell. Alternatively, whenever the MACD moves over the signal line, your indicator reveals a bullish signal, which shows that, is more likely for the price of the precise asset to experience an upward momentum. A lot of FX traders prefer to wait for the cross to move over the signal before entering into a position in order to avoid entering into a position hastily or getting faked out.
To further explore MetaTrader 4 indicators highlighted, we will present the second method – ‘Divergence’. This happens when the security price deviates from the MACD, which reveals the end of the current trend. The last technique is known as the ‘Dramatic Rise’. This happens when the MACD rises rigorously. The shorter moving average pulls out of the longer-term MA, which reveals that the security is overbought and will go back to the normal levels.
Traders watch for an under the zero or move over the line, as this reveals the position of the short-term average in respect to the long-term average. In addition, when the MACD moves above zero level, the short-term average is more than the long-term average, and it indicates an upward momentum. The reverse is the case when the MACD is below zero. In fact, the zero line often acts as a resistance and area of support for this FX indicator.