An indicator is an auxiliary tool that facilitates technical market analysis. More than one thousand trading strategies were compiled on their basis, some of them have allowed the authors to achieve considerable success in trading.
It is difficult to name the best forex indicators because much depends on the style of a particular trader. One of them will be able to work with a pair of moving averages profitably, the second one will be more suitable for Stochastics, the third one will give preference to indicators of Bill Williams - there is no universal recipe. Apart from the abundance of standard indicators, there are also custom ones. Such Forex indicators may implement new approaches to chart reading, as well as present new insights to enhance a trading strategy.
Custom indicators are necessary to find market turning points and its movement vector. These indicators should not be considered along with such classical tools as oscillators or trend indicators, because these indicators are from a newer generation. They were created by traders taking into account their preferences for certain needs of creators. A trader needs to take into account the obtained data when making forecasts. That is, the main purpose of custom indicators is to save the trader's time: they perform calculations, which can be done by the trader, but it will take much more time. Despite different ways of displaying information by different indicators (bars, columns, histograms, lines, etc.), they are all very clear and convenient.
At first glance, the indicators extract such a necessary resource for a trader, as time. It would seem that this is an obvious advantage of using indicators, but we should not forget about the backside: the trader, addicted to getting ready-made information, gradually loses the necessary skill of complex calculations. As for beginners of trading, they can use an indicator for a long time, even without understanding the algorithms of its work. Since the market situation is constantly changing, the moment may come when a trader's blind confidence in the indicator will play against him; a gross mistake will be made, which will result in financial losses.
How To Add An Indicator To MT4
MT4 has a very useful option - each user can make the necessary changes to it, including adding scripts, advisors and other tools. The export process is not complicated, it can be performed by any trader, you just need to know step by step how to set an indicator in MT4.
Adding the necessary indicator begins with its download from the Internet. In most cases, the trader receives an archive, which must be unzipped for further work with it. Then the user sees the folder with the indicator file on the computer. The necessary file can be easily found, it can be of two types:
with the extension .mq4;
with the extension .ex4.
Sometimes you can download the archive with one of these extensions, and sometimes with two at once. Then you need one of the files, no matter which one, place it in the desired folder. Today there are two ways to install indicators to the mt4 terminal.
The first one is that the indicator, as mentioned above, should be copied to the necessary folder of the trading terminal. When installed on the MT4 computer, the system places all the folders and program files at c:\Program Files\MetaTrader. Often, the name of the directory is the name of the broker, whose terminal is used. Once you find yourself in the terminal directory, you should go to the MQL4 folder and find the indicators folder in it. It is in this folder that you should place the necessary file.
Another way to install an indicator in mt4 implies the following actions. You need to open the trading platform and go to the "File" menu. Then you should choose the "Open data folder" in the appeared list.
Then everything is similar to the first method. You need to go to the MQL4 catalog folder, find the folder and place the necessary file into it. Once you have performed all these actions, it is necessary to restart mt4.
The indicator is now in the terminal, but it is not activated, so it must be started. It is necessary to go to the "Insert" menu, where you should select "Indicators". Inside the appeared list you should go to the "Custom" folder, where all new tools are installed.
Once you have found the necessary one, you should press on it and set two ticks, allowing the import of external experts and DLL. The indicator has been installed and is ready to work, now you just need to place it on the chart. First, open the necessary chart, then find the indicator and click on it - it will be set and start working. Or you can use another way - just drag and drop it on the chart.
Pros And Cons Of New Indicators In Forex Trading
The main advantage of using indicators is the fact that your emotions will not influence trading results. An indicator is a program based on economic data and mathematical formulas. Everything is strictly rational, unlike a human being. There is a special term for strategies with the use of indicators. They are called mechanical strategies. It means that trading with the use of indicators you omit the impact of the unreasonable psychological factors on your trading judgments.
Of course, trading with indicators (custom or standard) has its disadvantages. Technical indicators normally react to the market fluctuations somewhat later than the actual change occurs, as some time is needed to collect the data and interpret it. If you do not react appropriately yourself, the indicator may become a cause for your losses.
In fact, most custom indicators are created solely for commercial purposes. The algorithm is almost totally based on standard trend indicators and oscillators, while the developers have presented a history of quotes, that is, when testing indicators on the historical data of the terminal it seems really impressive, but when trading online, the number of false signals exceeds 50%. The entry point to the market is displayed accurately after the signal has been processed.
Of course, there are custom indicators that are not redrawn and they all deserve special attention. The most efficient of them are the Chaikin oscillator and the adaptive moving average.
In conclusion, it should be noted that it is essential to employ several indicators in trading. Therefore, you will be able to get a complete picture of the market and even despite the abundance of all kinds of indicators and scripts, you should not get carried away with them. Remember that they play only the role of assistants in trading - making decisions remains the prerogative of a trader.