Valutrades Basic Trading Course - Lesson 16: Basic Oscillators on MT4

Welcome to the Valutrades Basic Trading Course!

Free FX Trading Signals from Valutrades: www.valutrades.com/en/trading-signals

This is a series of videos, designed to launch the journey of beginning traders, in every aspect of trading with Valutrades.

In this video, let’s take a look at Oscillators.

As we saw in the last lesson, on Bollinger Bands, combining an indicator with an Oscillator can help to confirm a trading decision.

A typical oscillator is a type of indicator used in trading that moves between 2 levels on a graph so therefore, by definition, it oscillates.

Oscillators are used by all levels of traders to indicate or confirm, changes in direction or reversals as we call them.

There are a variety of oscillators available on MT4 and we will look at 3 of them:

In our video on Bollinger Bands we looked at using the Stochastic Oscillator as a confirmation tool to attempt to spot reversals in conjunction with the bands.

Just select this as you would any indicator and leave the settings as you find them.

When you click OK, this indicator nests itself in a separate window below the main chart and you may alter the height.

You can use your Crosshairs here to align the data from multiple windows.

The Stochastic Oscillator consists of 2 Moving Averages that compare the closing price of each candle to a set period and plots the results between 0 and 100.

In simplistic terms, the Stochastic Oscillator measures the change in momentum of price action change.

A figure over 80 indicates that the asset may be overbought and a move to the downside may occur and conversely, figures below 20 may indicate an oversold situation and we may be looking at a reversal to the upside.

Typically, we want to see the 2 moving averages cross to the other direction before we consider opening a position.

Let’s go back to our Indicators List and select Oscillators and MACD.

Like Stochastics, the Moving Average Convergence Divergence (MACD) uses 2 moving averages.

It compares short-term market momentum to long-term market momentum.

The MT4 version of this indicator consists of a Histogram and a Signal Line.

The premise is that when the Signal Line exits the Histogram, we may anticipate a reversal.

Also, when MACD rises above or below the zero line, we may label the current market as either Bearish or Bullish.

Next, we have the Relative Strength Index or RSI.

This is a momentum indicator and looks at the speed and price action comparing average losses and average gains over the last 14 periods.

The RSI can be used in 2 ways.

Firstly, as the indicator oscillates between 0 and 100, we can consider anything below 50 a downtrend and anything above 50 an uptrend.

And, similar to the Stochastic Oscillator, anything above 70 may be overbought and anything below 30 may be oversold.

That’s all for now.

In the next lesson we will be looking at Advanced Oscillators.

Happy trading with Valutrades and we will see you soon.

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