Yesterday, I promised we’d talk more about Forex trading software. Our discussion will focus primarily on the Metatrader 4 (MT4) platform for ease of explanation. We’ll discuss other platforms in future articles.
Let’s start with giving you an idea of what these three things are:
An indicator is a line or other group of markings on a chart that assists you in analyzing price action. Indicators often take the form of a line such as a moving average that is superimposed on the price action chart that allows you to see where the price action is in relation to the indicator. You may also see indicators that have their own sub-windows (such as the Stochastic or MACD indicators) and their own scales. These indicators may have multiple lines that can be used to indicate certain market conditions. Other indicators may manifest in the form of marks on the price action that show potential reversal levels or prior highs/lows. Indicators don’t actually execute trades, they just give you additional market information over and above the pure price action. These indicators can show you certain calculated results of price action or other indicators – or may even bring in data from other pairs or markets to help you identify your highest probability trades. When using indicators, remember that more is not necessarily more. You can have too many indicators that will just result in confusion.
To give you an idea of what Indicators do, open your MT4 trading platform (if you need a demo account for practice you can find one here.) Click the Navigator button in the upper tool bar and click the plus sign next to Indicators in the Navigator window (see image.)
Drag Bollinger Bands over and drop it on your chart.
The indicator’s parameters dialog box will appear on the chart. Enter the parameters you want to use and click OK to apply the indicator to the chart.
This is an example of an indicator that overlays on the price action to allow you a direct comparison of the indicator to the price action.
Here is an example of an indicator that has it’s own sub-window, allowing you to compare the lines to it’s own scale or to look for crossovers of multiple lines. Sometimes, the indicator is a simple histogram indicating momentum or volume.
Well, that’s all we have time for today. Tomorrow we’ll go into scripts and how they are used. Thanks for your attention!
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