Best Forex Indicators For Successful Trading. TU Research

Theoretical part of the research

Having analyzed technical indicators available on MT4, one of the most popular trading platforms, the experts of TU’s analytical team concluded that all indicators can be classified as follows:

Trend indicators

Trend indicators are mathematical price averaging. Based on this, the movement of the price (trend) in the future can be predicted. This group of indicators is characterized by the following behavior:

1. After a trend (price movement) appears in the market, the indicators alert about its start.

2. A certain time passes from the moment of the trend reversal to the moment of receiving the signal of the trend indicator – this is called indicator lagging. Therefore, prior to the appearance of the signal the price has already passed a part of the trend movement. At that, lagging of trend indicators contributes to higher reliability of signals provided by them.

3. If there is no trend in the market, the indicators provide many false signals. Therefore, working with them is justified only if there is an evident trend on the chart.

The following trend indicators are available on the MT4 trading platform:

• Adaptive Moving Average

• Average Directional Movement Index

• Average Directional Movement Index Wilder

• Bollinger Bands®

• Double Exponential Moving Average

• Envelopes

• Fractal Adaptive Moving Average

• Ichimoku Kinko Hyo

• Moving Average

• Parabolic SAR

• Standard Deviation

• Triple Exponential Moving Average

• Variable Index Dynamic Average

Oscillators

Oscillators are leading indicators. Under certain conditions, they allow you to predict trend reversal. They are some of the most valuable tools of a technical analyst. At the same time, oscillators are often used incorrectly.

Trend indicators register and confirm the presence of a trend, while oscillators can indicate its reversal and provide a possibility to predict market trends, not just follow them.

There are many types of different oscillators; their charts are placed under the price chart in a separate window. The scale of changes in oscillators can be different, depending on the method of calculation and construction.

The following oscillators are available on the MT4 trading platform:

• Average True Range

• Bears Power

• Bulls Power

• Chaikin Oscillator

• Commodity Channel Index

• DeMarker

• Force Index

• MACD

• Momentum

• Moving Average of Oscillator

• Relative Strength Index

• Relative Vigor Index

• Stochastic Oscillator

• Triple Exponential Average

• Williams' Percent Range

Volume indicators

Volume indicators are a rather specific category of technical indicators. Other indicators use price values at different time frames and also its graphic display, while volume indicators calculate their values based on ticks – the number of transactions per unit of time.

Despite that the real trading volumes in the Forex market are not available, the use of volume indicators allows you to determine growth or decline of demand on time, which makes it possible to predict further trends and determine the moment when the trend ends. At that, for exchange instruments, volumes mean volumes of performed trades (in contracts or in monetary terms).

The following volume indicators are available on the MT4 trading platform:

• Accumulation/Distribution

• Money Flow Index

• On Balance Volume

• Volumes

Results of the research by TU Research Department (*)

In order to answer the question of whether successful traders use technical indicators and which group of indicators they prefer, the team of TU analysts surveyed 2,200 trading in the Forex market via the brokers from the Top 10 of the Traders Union rating. The survey was conducted using the CAWI (Computer Assisted Web Interviewing) method. The non-sampling error of the survey with a confidence level of 95% is no more than 2%.

Successful traders from different countries were offered to fill out a structured questionnaire, sent to them via email. All respondents have shown profitable trading for at least one year.

5.1. Surveyed traders by gender:

• 74% — men;

• 26% — women.

5.2. There are the following age groups in the sample:

• 44% of the respondents are aged 18-30;

• 37% — aged 30-45;

• 16% — aged 45-60;

• 3% of the respondents are older than 60.

5.3. In terms of their trading experience, the composition of the respondents was as follows:

• 4% of the respondents have been trading on Forex for over 10 years;

• 23% — more than 5 years;

• 41% — from 3 to 5 years;

• 32% — from 1 to 3 years.

5.4. In terms of the average monthly deposit growth for the last 12 months the results of the surveyed traders are as follows:

• 3% of traders — up to 15%;

• 16% of traders — up to 10%;

• 32% of traders — up to 5%;

• 30% of traders — up to 3%;

• 19% of traders — up to 1%.

Picture 5.4. Average monthly return rate of successful traders, %

5.5. The responses of the respondents regarding their trading strategies were as follows:

• 48% use long-term strategies;

• 52% — short-term strategies.

5.6 The responses of the surveyed traders to the question about their use of technical indicators were as follows:

• 27% of the traders use technical indicators as the main signal for opening a trade;

• 14% of the traders use technical indicators as a confirmation signal for opening a trade;

• 26% of the traders prefer to use technical indicators both as the main and as the confirmation signals for opening a trade;

• 33% of the surveyed traders do not use technical indicators

5.7. The respondents who replied that they were using technical indicators for making the decision on opening a trade were also asked which group of technical indicators they preferred to use (they could choose several options):

• 37% of the traders use trend indicators;

• 41% of the traders use oscillators;

• 22% of the traders prefer volume indicators

Findings

PDF version of the TU research

For more detailed information on trading CFDs of different types, download the full version of the research conducted by our team.

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MT4 indicators | Expert Opinion

There is a humongous number of trading strategies in the Forex market, with technical indicators being of great significance in many of them. Experienced traders know that there are no perfectly performing technical indicators and the set of technical indicators that works for the strategy of one trader may not work for the other trader. Therefore, the choice of indicators must be conscious, to fit the strategy.

It is also necessary to thoroughly choose indicator settings, as they can change significantly, for example, depending on the time frame chosen by the trader.

Before using indicators, it is recommended that you test your selected set of indicators on a demo account or a real trading account with minimum trading lots and leverage. Based on the trading results, it is advisable to perform analysis of all trading decisions made based on the signals, received by using the chosen technical indicators, reviewing possible ‘false’ signals, received as a result of their application – this way you can continuously improve and perfect your trading strategy. Make sure to check your percentage of profitable trades and maintain it at higher than 50%, and then Forex trading will bring your stable and high profits.

Anton Kharitonov

Financial expert and analyst at Traders Union