The classic approach to trading involves searching for the major price trends. For successful trading, it is necessary to determine the global price movement and open positions in this direction. There are special programs that allow you to identify a trend on the Forex market charts.
Traders have access to various tools that allow them to identify a downtrend or uptrend when working with a separate currency pair.
Expert Advisors, indicators and scripts can be downloaded and tested for free on our website: Indicators.
The main benefit of trend indicators is that they calculate the average price movement and indicate its probable direction in the future. The most accurate forecasts usually relate to long time intervals – from D1.
But trend tools also have a disadvantage that should be taken into account – most of them give a signal after the trend is formed. That is, there is a certain lag. As a result, the indicator-oriented trader does not open transactions immediately after the moment of reversal.
The later a player enters the market with a formed trend, the less price movement (profit) he will take. But the lag is not significant. Part of the movement is missed, while the trader still sees the trend change and enters the market taking into account the new trend.
You can react to market changes faster if you want to. To do this, you need to personally analyze the price movement and use indicators as an auxiliary tool.
The work of the trend indicator group has the following features:
- After the formation of a new global price movement in the market, the program gives a signal about the emergence of a trend.
- A certain time passes from the moment when the price reverses and before the signal about this event. This time interval is called the indicator lag. On the one hand, the trader sees the signal not at the very beginning of a new movement, on the other hand, such data is more reliable.
- If there is a sideways movement in the market, then the indicators can give various false signals. For this reason, you need to do some basic chart analysis yourself. That is, to check the received signals.
Most trend indicators have the appearance of a curved line below or above the price movement level. Some indicators are shown in the basement part of the chart.
The Moving Average indicator – Moving average – is often used to determine the trend in the foreign exchange market. Also popular are:
- Parabolic SAR.
- Bollinger Bands.
Moving Average is an indicator that is formed on the basis of average prices over a particular period of time – an hour, a day, a week.
The older the timeframe is used for analysis, the smoother the moving average will be. If you choose a short period, the indicator will react more clearly to market changes, but the risk of receiving a false signal will increase. For this reason, you should always test the indicators within your own trading strategy and select the optimal settings.
Trend indicators have several clear advantages:
- Determining the current trend. If the trader has doubts about the dominant price movement, then indicators will help to clarify. As a result, you can confidently open transactions in the trend direction and earn money.
- Flexibility of settings. The trader can configure the program under his trading strategy for a more accurate search for market entry points.
- Filter function. Together with oscillators, trend indicators can be used to filter out false chart models. That is, the trader, focusing on the received signals, misses those market changes that are not related to the global trend.
Trend indicators also have disadvantages:
- There is no information about the time of the trend end. Using the indicator, you can determine the main price movement, but you need to search for a market exit point using other analysis tools.
- It is difficult to find the optimal settings. Trend indicators are flexible – the trader has the opportunity to set a variety of parameters for conducting market analysis. But you will have to spend time testing to get the optimal values within your own trading strategy. As a result, you may never find the perfect combination.For this reason, many players are forced to use additional filters to filter out false signals of trend indicators.
If you combine indicators and your own analysis, you can quickly react to key market changes.
Examples of trend indicators
Many programs that indicate the main direction of a currency pair movement have the appearance of lines on the chart.
It shows the average price of an asset for the period selected by the trader. There can be several types:
- Simple moving average.
- The derivative of the first 2 types.
A simple moving average shows the main price changes, indicating the most probable movement in the future.
The disadvantage of the indicator is that all points of the line have the same value. But in reality, similar candlesticks can hide different potential for changes in asset value.
To make the analysis of the market situation more accurate, an exponential moving average was invented. This indicator attaches more importance to the latest market data, because it is considered more important.
Accordingly, the exponential moving average reacts faster to chart changes.
You should understand that the main task of moving averages is to confirm a new trend already formed. They do not predict the reversal of the global currency pair movement.
When the market is bullish, the indicator line goes below the price. If the moving average rises above the candlesticks, this indicates a bearish trend.
When the indicator line meets the price from top to bottom, this is a sell signal. If the moving average enters the candlesticks from below and goes up, then you need to buy the currency.
When moving sideways, the signals from Moving Average do not need to be taken into account. This indicator is useful only when there is a trend trading.
The indicator indicates the level of the instrument volatility within the trend. With its help, you can more accurately determine the entry points in those periods when the asset goes beyond the already fixed price levels.
The farther the bands are from each other, the higher the level of volatility of a single currency pair is, the closer they are, the less the potential for price fluctuations is.
High volatility indicates that the trend has growth potential as large players are involved in the trade.
Bollinger bands helps in predicting long-term trends for the price movement on Forex.
The work of this indicator is based on taking into account the difference between two moving averages with different construction periods. The indicators are displayed at the bottom of the terminal.
There are 2 formats for displaying the MACD:
Linear. It has the appearance of two lines – the main one and the signal one. It shows the difference in the sentiments of the stock-exchange crowd at different time intervals, and also allows you to determine the speed of market changes.
Histogram. Horizontal lines indicating a bullish or bearish trend.
Relative Strength Index (RSI)
Using this indicator, you can determine whether a currency pair has a growth impulse at the current moment or not. The RSI is also used to analyze the market situation and identify dangerous changes in quotations.
The indicator is placed under the chart and gives signals in the form of numbers from 0 to 100:
- If the RSI line rises above the level of 70 units, then the asset is considered overbought – the upward movement will fade.
- The position of the indicator line at the level of 30 and below indicates oversold. This means that the price will go up.
Trend Expert Advisors
Sometimes they are also called trend robots. Such programs are good because they make automatic trading available. The trader adjusts the parameters of a trend Expert Advisor and it opens and closes transactions itself in accordance with the specified values.
The work of such programs is often based on the analysis of trend indicator signals. The main task of such robots is to trade in the direction of the trend. That's why they are called trend Expert Advisors.
When choosing an Expert Advisor, first of all, you need to pay attention to its functionality. It should provide automation of the selected trend strategy. Some variants of such Expert Advisors can be found in our store: https://trading-go.ru/advisors/.
With the help of Expert Advisors, you can fully or partially switch trading for a separate strategy to automatic mode. The main thing is to correctly configure the algorithm on the basis of which the robot will open transactions and exit the market.
- There are Expert Advisors that make their calculations based on the Moving Average indicator and open positions only in trends. Sometimes you can set the appropriate stop-loss and take-profit values and select a part of the lot in the settings.
- Some Expert Advisors can open and close positions simultaneously on several currency pairs.
- You can find programs "geared" towards trading on short timeframes (5, 15 minutes) and Expert Advisors developed for daily charts. But the most stable results are given by robots that use data from large time intervals.
- In some Expert Advisors, you can configure several separate trading algorithms. Each of them will work fully autonomously and will be launched only when the values appear on the market that match with those set by the trader.
Individual algorithms inside the Expert Advisor can be activated and deactivated if they are temporarily not needed. Due to this flexibility of settings, trend robots are capable of giving significant profits.
All indicators, Expert Advisors and scripts must first be tested on a demo account. Only after receiving stable results, trading robots can be connected to a real account.
You also need to take into account the fact that the market changes periodically. After any noticeable changes in the behavior of the currency pair, it is necessary to make changes to the trading strategy and to the Expert Advisor that automates it.
Unlike indicators and Expert Advisors, the script executes a single command. Such triggering is often one-time and is made at the trader's request.
An example of the script action is closing and deleting orders in the MetaTrader terminal. The trader can close the order manually. But the script can do this automatically, thereby making routine work easier. All you need is submit a request to the program.
Other useful functions can be automated with the help of scripts. For example, unloading of the trading history according to the specified settings.
If the Expert Advisor itself can open and close transactions, then the function implemented in the form of a script will work only if the trader launches it. That is, the program itself cannot be activated. Also, the script is not capable of repeating a certain action on its own – a launch will be required every time.
If the trader is focused on trend trading, then he can use scripts to quickly launch any chart elements. This simplifies trading as you don't have to draw everything manually.
Some types of scripts can also be found on our website: https://trading-go.ru/scripts/.
The functions of scripts are becoming increasingly difficult. Increasingly, they include the execution of full-fledged trading operations.
How to launch programs in MetaTrader 5
Basic trend indicators are already built in the terminal. To find them, click Insert menu item.
Select Indicators in the list of available functions and go to the Trend group.
You need then to determine the appropriate option and click on it twice. As a result, a window with the indicator settings will open.
If you select, for example, Bollinger Bands, configure it and press OK, then Bollinger Bands will appear on the chart.
You can buy trend indicators, Expert Advisors and scripts in the MT5 terminal. For this purpose, there is the Market section at the bottom. Using a simple menu, the purchased program is quickly installed in the terminal.
And we invite all our readers to visit our store, which also contains many quality programs for optimizing forex trading.