Various indicators are not uncommon in trading. There are large analytic online resources with graphs, news, and lots of built-in ideas and strategies. In addition, the MetaTrader4 platform and its older version are widely popular. This article will discuss how to choose an indicator of support and resistance levels for MT4, what they are and whether they should be used at all.
Arguments for
Like any other indicator of support and resistance levels for MT4 can save time spent on price analysis. In addition, the installed addition will give the trader more confidence in his actions and, possibly, even increase the number of correct entries in the transaction. Most likely, this will become a reality if the indicator of support and resistance levels for MT4 is used in conjunction with an independent technical analysis and supplements it.
In any case, such additions can help to see some changes that are hardly noticeable on the “bare” chart and react to them in time or at least start acting more carefully, for example, to reduce the volume of the position being opened if there is any doubt regarding the direction of the price.
Arguments against
Trading is a very subjective field, and all the rules of technical analysis are only advisory in nature. The market is driven by its other participants, not the formulas and graphs that you see on the screen. Accordingly, any indicator of horizontal support and resistance levels for MT4 is written by the same traders. It may not take into account some points or spell out only those conditions that the creator of the add-on considered necessary and convenient primarily for himself.
Perhaps the risk associated with errors and false entries in the transaction will increase, and the line drawn by the automatic indicator of support and resistance levels is just a zone of a small price pullback. There are a lot of potential problems with indicators; they will be individual in each individual case and require attention. For example, an incorrectly specified parameter can turn a useful addition into a tool that draws chaotic lines in a terminal window or simply knocks down all display settings, including color gamut, graphic style, and fonts. This is not critical, but it will take time to bring the MT4 window into operation.
The best indicator of support and resistance levels
This is probably a very popular search query. However, any automatic indicator of support and resistance levels cannot be better or worse, this is just the formula and arguments laid down in the program, as mentioned above. Many traders drive themselves into a trap using dozens of different indicators, which often only confuses and confuses them, and ultimately leads to a loss of deposit and frustration.
Of course, exceptions are possible, because there are many trading systems, robots, which are based on automation. However, they are used by real professionals who understand how indicators work, they know what support and resistance are, and, as a rule, traders write robots for themselves.
If you go back to which indicator of support and resistance levels for MT4 to choose, then you should first look at the classic moving averages, Fibonacci lines and many other relatively popular things.
Self-determination of support and resistance levels
In fact, there is nothing complicated, and this will be the most effective method. An important aspect will be that which reflects support and resistance. They interpret important market information.
Support reflects current demand. This is the line that is located below. In order to find it, you need to connect the price lows on the chart. The value of an asset or a currency pair will ricochet from the given line, unsuccessfully trying to break through it and go down. This behavior reflects the preponderance of bulls, that is, traders who play on the rise, and in addition, this situation means that demand is higher than supply.
The resistance line is the opposite of support. She doesn’t let the price go above a certain level, and she, in turn, is forced to jump from it every time. To find support, you need to connect the upper highs, that is, the tops of the value of your asset. The situation when the price cannot break such a line means that the offer has reached a certain maximum, and then a price decline is possible. It should be noted that the higher the time period on the chart (time frame), the stronger the levels will be. They will be applicable at shorter intervals and will be essential.
It is important to return again to the breakdowns of levels. As a rule, if the price stops bouncing off the line and quickly crosses it, then it will rush to the next zone, and the current trend will be confirmed. The above concept is maximally simplified, so it is recommended that you study more material on this topic yourself.
Why is it necessary
By learning to determine the levels yourself, you can save yourself and your chart from unnecessary indicators, well, or at least use them not thoughtlessly, but understand the principle of work and filter false information more efficiently. In addition, knowledge of the key principles of level building will help advance in further training in technical analysis and will help in developing your own trading strategies.
Useful Tips
If you still decide that you need an indicator of support and resistance levels for MT4, it is recommended to look for it only on authoritative resources related to trading. You should also avoid various one-page sites with dubious signals, paid add-ons and other potential fraud.
Before installation, it is important to carefully read the description, the principle of operation and settings, as well as the reviews of other traders about the indicator that you are downloading. It will be difficult to choose because of the large number of different additions. Therefore, you should also pay attention to the number of downloads and specific tasks of the indicator, some of them have many third-party, but nice features, for example, signal about a breakdown of the level.