Volatility in stocks has been enhanced since the beginning of 2022, and now that a new earnings season is about to start, it would be wise to brace for large price swings. However, fundamental analysis is not always enough to spot efficient trade opportunities, which leaves traders reliant on technical analysis.
When using the popular MetaTrader 4 platform, there are several trading tools that can be used for stock trading. Here are a few golden tips and tricks for using these tools.
1. Spotting trends and price structures
Overcrowding a chart with indicators is not exactly productive. Instead, traders can keep things simple, attempting to understand the market structure using the drawing tools available on MT4.
With different lines and graphs, you can see when the market is trending or forming different patterns like channels, triangles, or wedges. This is true even when analyzing stocks, and traders can gain plenty of insightful information on the underlying order flow.
2.Monitoring important moving averages
Moving averages remain useful indicators for traders of all experience levels, because the price clearly reacts to them. Market participants tend to treat averages as dynamic support/resistance levels, and on many occasions, a stock price makes a turn near an important MA.
For example, as of late, the Tesla stock (TSLA) staged an important rebound, now trading a little below all-time highs. The price bottomed around the 200-day simple moving average, one of the most common MAs among traders. 100-period or 50-period moving averages can be useful in this context as well, and all of these MAs – alongside others – can be plotted on the MetaTrader 4 platform.
3.Using oscillators to spot oversold/overbought conditions
Stock prices don’t move up or down in a straight line, which is why pullbacks can turn out to be opportunities to rejoin the dominant trend. At some point, the stock price is always overbought/oversold, and that’s when market participants start to take profits off the table.
Finding overbought/oversold conditions is possible with oscillators like the Relative Strength Index (RSI), or the Stochastic. Several other indicators are available with MT4 but these two are by far the most popular.
Stocks seem to react to signals generated by oscillators. At the beginning of December 2021, the Apple stock (AAPL) entered overbought territory, and that was signaled by the RSI trading above 70. The price retraced lower, but buyers rejoined once the RSI got close to the 30 area on the RSI, which translates to oversold conditions.
MetaTrader 4 has been updated numerous times since its creation, making it even more reliable and trustworthy. Traders using it now have access to plenty of trading tools. It’s possible and even recommended to trade stock with MT4, without overcomplicating the process and also while not making compromises on performance.
Some of the tools embedded into the platform have passed the test of time and can still help traders in finding new setups, when examining a wide range of stocks.