Build effective trading strategies on MT4

MetaTrader 4 (MT4) is one of the most popular trading platforms worldwide, suitable for all types of traders, regardless of experience. MT4 has become widely popular for many reasons, especially for the exceptional user experience it offers, as well as the wide range of trading strategies on MT4 that help traders adapt the platform to their style.

In this article, we’ll go through how traders can develop effective MT4 strategies using three tried and tested tools: EMAs, MACD, and Pivot Points.

MT4 also offers a lot of customisable features, including automated trading through Expert Advisors (EAs), multiple charting options, and a wide range of technical indicators. These features are useful for both beginners et experienced traders because they allow them to test strategies in real time or on historical data. This makes it easier to learn and refine trading methods without risking a lot of capital.

Understanding the Core Tools for Trading Strategies on MT4

Exponential Moving Averages (EMAs)

Moving averages (MAs) help you spot trends in the market. Traders often use both simple and exponential moving averages for short- and long-term time periods.

The Exponential Moving Average (EMA) reacts quickly to price changes, while the Simple Moving Average (SMA) gives equal weight across data points. This makes it easier to capitalise on the most recent market trends and movements.

MACD (Moving Average Convergence Divergence)

Traders use the moving average convergence/divergence (MACD) indicator to identify price trends, measure trend momentum, and spot potential buy or sell signals. You calculate the MACD line by deducting the 26-period exponential moving average (EMA) from the 12-period EMA.

The signal line is a nine-period EMA of the MACD line.MACD is most effective on daily charts, where the traditional settings of 26/12/9 days are the default.

The signal line is plotted on top of the MACD line, which can act as a trigger for buy or sell signals. When the MACD line crosses above the signal line, traders may buy the security. When the MACD line crosses below the signal line, they can sell the security.

There are many ways to interpret MACD indicators, but crossovers, divergences, and rapid rises/falls are the most common.

Pivot Points for Smarter Trading Strategies on MT4

Pivot points help traders find key support and resistance levels in the forex market. They give valuable insight into market sentiment, helping traders make more informed decisions and manage risk well. When used together with other technical tools, pivot points can improve trading strategies on MT4 and boost overall performance.

A pivot point shows a change in market sentiment and helps identify the overall trend within a specific time interval. It acts like a hinge, showing where the price can go up or down. Floor traders on equity and futures exchanges developed pivot points. They are now widely used with support and resistance levels to confirm trends and manage risk.

Pivot points, much like other types of trend line analysis, look at the relationship between the previous day’s high, low, and closing prices. These values are then used to calculate the pivot point for the current trading day. Pivot points can be applied to nearly any trading instrument, and they are especially useful in the forex (FX) market, where traders often use them to analyse currency pairs and refine their trading strategies on MT4.

The forex market is very liquid and trades with very high volumes, which reduces the impact of market manipulation and increases the reliability of support and resistance levels generated by pivot points.

How to calculate pivot points

Traders use pivot points to estimate potential support and resistance values for the next trading day. They are calculated using the previous day’s high, low, and closing prices of a currency pair.

Pivot Point for Current = High (previous) + Low (previous) + Close (previous)

The pivot point can then be used to work out the support and resistance for the current trading day. Using the pivot point, you can estimate three levels of support (S1, S2, S3) and resistance (R1, R2, R3).

To see how accurate pivot points can be, you can analyse historical price data, for example, the EUR/USD pair.

Steps:

1. Calculate pivot points, support and resistance levels for several days.

2. Subtract the support pivot points from the actual low of the day (Low – S1, Low – S2, Low – S3).

3. Subtract the resistance pivot points from the actual high of the day (High – R1, High – R2, High – R3).

4. Calculate the average distance for each difference.

This information is useful to a trader. For example, if a currency pair falls below S1 44% of the time, you can place a stop below S1, knowing that probability is on your side. Additionally, you may want to take profits just below R1 because the price moves above R1 only 42% of the time.

However, these are probabilities, not guarantees.

On average, the average high is 1 pip below R1 and price exceeds R1 42% of the time. This doesn’t mean the high will exceed R1 four days out of the next 10, or that the high will always be 1 pip below R1.

The real value of these numbers is that they are able to gauge potential support and resistance in advance, provide reference points for setting stops and limits, and manage risk while increasing the possibility of making a profitable trade, especially when incorporated into trading strategies on MT4.

The 5-minute EMA-MACD momentum strategy

The 5-minute momo, or momentum strategy, uses EMAs and MACD to help traders profit from quick momentum bursts in forex pairs.

Traders prefer exponential moving averages (EMAs) because they respond quickly to price changes on 5-minute charts.

Momo trades can fail if the trading range is too tight or if stops are hit before targets. This shows how important it is to plan and follow through carefully.

How to execute a long trade with the 5-minute strategy

Find currency pairs trading below the 20-period EMA with the MACD in negative territory.

Check that the price is above the 20-period EMA. Also, confirm that the MACD has crossed from negative to positive or has gone into positive territory within the last 25 minutes (five bars or less on a five-minute chart).

• Buy a long position 10 pips above the 20-period EMA.
• Place a stop-loss at the swing low on the five-minute chart for an aggressive trade.

For a conservative trade, place a stop 20 pips below the 20-period EMA.When your profit reaches the amount you initially risked, take profit on half of the position and move the stop on the other half to break even.Trail the stop at breakeven or at the 20-period EMA minus 15 pips, whichever is higher.

Apprenez des autres

Tools like EMAs, MACD, and pivot points can help traders create good trading strategies on MT4. These can help traders spot trends, measure momentum, and identify key support and resistance levels, which makes it easier to make informed decisions. Strategies such as the 5-minute EMA-MACD momentum approach show how combining these tools can help you take make the most of short-term opportunities.

Planning ahead, staying disciplined, and managing risk will help you perform well on MT4. By learning these techniques and using all the platform’s features, you can create strategies that help you trade better and increase the possibility of making profitable trades.

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