Best Forex Indicators For Successful Trading. TU Research

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Introduction

With today’s variety of available technical indicators it is often difficult for a trader, especially a beginner, to choose a specific group. Traders Union experts conducted a research to find out which groups of indicators are the most effective ones. 

In order to fulfill the task, the team of TU analysts surveyed 2,200 successful traders, trading via the brokers from the Top 10 of the Traders Union rating. As a result of the survey, TU experts obtained unbiased data based on the experience of successful traders and determined the optimal group of technical indicators based on the opinion of the majority.

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:

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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.

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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

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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.

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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

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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).

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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%.

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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.

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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

Use of indicators for opening trades Votes %

As the main signal

594

27%

As a confirmation signal

308

14%

As the main and confirmation signals

572

26%

Don’t use

726

33%

Total

2200

100%

Table 5.1. Distribution of traders’ answers on their use of technical indicators for trading in the Forex market

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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

Used groups of indicators Votes %

Trend indicators

1929

37%

Oscillators

2138

41%

Volume indicators

1147

22%

Total

5214

100%

Table 5.2. Distribution of traders’ answers regarding the groups of technical indicators they use

Findings

Based on the results of the research, TU analysts have reached the following conclusions:

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    The majority of traders use technical indicators, one way or the other, as a signal for opening trades in the Forex market (67% of the respondents).

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    The number of traders using technical indicators as the main signal and those who use them as the main and confirmation signals is approximately the same (27% and 26% respectively).

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    The majority of the surveyed traders prefer to use oscillators (41% of the traders who use technical indicators.

    This can be explained by the fact that oscillators can act as leading indicators, providing signals ahead of price action. Instead of simply reacting to price movements, oscillators allow traders to anticipate potential turning points. A pivotal function of oscillator indicators is their proficiency in spotting divergences between price and oscillator values. Divergences are often deemed as strong heralds of impending price reversals, making them invaluable for predicting price movements with a higher degree of accuracy.

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    Traders who prefer long-term trading strategies use trend indicators much more frequently than their colleagues who use short-term strategies.

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    Novice traders use oscillators much more rarely than experienced traders.

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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.

Download PDF version

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

Anton Kharitonov

Financial expert and analyst at Traders Union

(*) Survey criteria:

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    Survey audience: Forex traders of the TU community aged 18 and older trading with the brokers from the TOP 10 list of TU rating.

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    The sample is representative in terms of age, gender and Forex trading experience.

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    Sample number: 2200 respondents.

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    Survey method: CAWI (Computer Assisted Web Interviewing).

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    Non-sampling error of the study with a confidence level 0.95: no more than 2%.

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    Period of survey: September 22-24, 2023.

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Our research is of a charitable nature and was created at the expense of Traders Union with the objective of increasing financial literacy of Internet users and increasing the percentage of successful transactions among traders. If you enjoyed our research and found it useful, please share it with others.

Team that worked on the article

Ivan Andriyenko
Author at Traders Union

Ivan Andriyenko is a financial expert and analyst. He specializes in trading in the Forex, stock and cryptocurrency markets. His preferred trading style is conservative strategies with low or medium risk, medium and long-term investments. He has 7 years of experience in the financial markets. Ivan is involved in preparation of articles for novice traders, and also of the reviews and evaluation of brokers, analyzing their reliability, trading conditions and peculiarities.

Ivan continuously tests new strategies for various assets, choosing the most effective options. In addition, he believes that helping novice traders is an important aspect of work. He shares information that beginners require – educational materials, strategies.

Ivan’s motto: continuous studying and experimentation lead to success.

Olga Shendetskaya
Author and editor at Traders Union

Olga Shendetskaya has been a part of the Traders Union team as an author, editor and proofreader since 2017. Since 2020, Shendetskaya has been the assistant chief editor of the website of Traders Union, an international association of traders. She has over 10 years of experience of working with economic and financial texts. In the period of 2017-2020, Olga has worked as a journalist and editor of laftNews news agency, economic and financial news sections. At the moment, Olga is a part of the team of top industry experts involved in creation of educational articles in finance and investment, overseeing their writing and publication on the Traders Union website.

Olga has extensive experience in writing and editing articles about the specifics of working in the Forex market, cryptocurrency market, stock exchanges and also in the segment of financial investment in general. This level of expertise allows Olga to create unique and comprehensive articles, describing complex investment mechanisms in a simple and accessible way for traders of any level.

Olga’s motto: Do well and you’ll be well!

Mirjan Hipolito
Cryptocurrency and stock expert

Mirjan Hipolito is a journalist and news editor at Traders Union. She is an expert crypto writer with five years of experience in the financial markets. Her specialties are daily market news, price predictions, and Initial Coin Offerings (ICO). Mirjan is a cryptocurrency and stock trader. This deep understanding of the finance sector allows her to create informative and engaging content that helps readers easily navigate the complexities of the crypto world.