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Workshop #2 Technical Analysis using MT4

Posted:2021-03-26 11:50:51 Click:1335

Technical Analysis Using MT4





1. Introduction


In this workshop, we will learn how to make use of  MT4 system for chart analysis.

As mentioned before, one of the most powerful functions of MT4 system is its numerous built-in Technical Indicators/Oscillators tools that can be used by simple select-&-clicking.

In this Lab, we will learn how use MT4 Technical Indicator tools to do technical analysis.

In particular, will will study the following FOUR commonly used TA tools:-

1. Moving Averages (MA)

2. Bollinger Bands (BBs)

3. Relative Strength Index (RSI)

4. Stochastic Oscillator

5. MACD


2. Moving Averages (MA)


Moving Averages (MA) is the most basic and commonly used technical indicator.

It can be used in the following ways:

Case 1. MA-Crossing of Bar Chart/Line Chart

Case 2. MA-Crossing of TWO (or more) MA Indicators

Case 3. MA-Crossing of Bar Chart + Other Technical Indicator


Case 2.1. MA-Crossing of Bar Chart/Line Chart


2.1.1. Open a Daily Chart of DJI (US30) and Select Line-Chart

2.1.2. Add a MA(5) Indicator in Red color, zoom it bigger if necessary, like this:



2.1.3. What is the Bullish and Bearish criteria?

2.1.4. Identify the Bullish and Bearish MA-Crossing points.

2.1.5. Check the validity of these signal points. How?


Case 2.2. MA-Crossing of TWO (or more) MA Indicators


2.2.1. Still using the DJI Daily Chart, add one more MA indicator - MA(14) in Yellow.

2.2.2. When we use multi-MA signal crossing method, we normally use candle-stick/Bar-chart instead of Line-chart. Why?

2.2.3 Switch to Candle-stick chart. You will get something like this.



2.2.4. For the TWO MAs, which one is the Fast-moving MA, which one is the Slow-moving MA?

2.2.5. What is the Bullish and Bearish criteria for the MA-Crossing between Fast-moving & Slow-moving MA?

2.2.6. Identify the Bullish and Bearish MA-crossing signal points.

2.2.7. Check the validity of these signal points using the candle-sticks.

2.2.8. Compare with the single MA method, any conclusion?


Case 2.3. MA-Crossing of Bar Chart + Other Technical Indicator


2.3.1. MA-Crossing is commonly used with the combination of other technical indicator such as RSI.

2.3.2. Now, using the previous chart in Case 2.2, add a new sub-window of RSI(14) indicator. Like this:



2.3.3. Similar procedure as Case 2.2, identify the MA-Crossing points. But this time, we draw vertical line (red) from these points down to  the RSI chart window, like this:



2.3.4. Mark down the RSI values for each MA-crossing points.

2.3.5. Recall the lecture on RSI, what is the meaning of 30 & 70 RSI values?

2.3.6. How can RSI values help us to decide the chance of price reversal?

2.3.7. Check against the candle-sticks the validity of this method.


3. Bollinger Bands (BBs)


Bollinger Bands (BBs) is one of the most commonly used and reliable technical analysis tools.

Most of the time (around 80%) prices are "oscillating" between the upper and lower Bollinger Bands which give us a reliable thresholds for trading, especially for Forex and Commodity Day-trade.

For stock and financial indices such as DJI, D1 (Daily) Bollinger Bands are commonly used incorporate with other technical indicator for trading decision making.

3.1. From the previous DJI chart, add the Bollinger Bands with standard parameters (Period 20, deviation 2). Like this.



3.2 Observe closely the three Bollinger-Bands and their relationship with the price movement. It is not difficult to find out  that most of the time (over 80%) the price are moving between the upper and lower Bollinger-Bands, which in turn can give us the market-entry and market-exit reference prices.

3.3. Check closely the MA-crossing points identified in Case 2.3 with the Bollinger-Bands at these moments, check the validity of the prices of the Bollinger-Bands to be used as market-entry / market-exit prices.


4. Stochastic Oscillator


Stochastic Oscillator is also one of the most commonly used technical indicator to reflect the director of movement of the price pattern.

4.1 Using our DJI (US30) Daily Chart, add the Stochastic Oscillator with standard parameter i.e. Stochastic (5,3,3).

Where the main line in Green and Signal Line in Red. Like this:



4.2 What is the Bullish and Bearish Divergence Criteria for Stochastic Indicator?

4.3 Identify the Bullish and Bearish Divergence points and check for their validity.


5. MACD


MACD is a very important and commonly used by TA all over the world. Many TA (including me) believe reflects the "energy flow" of the price market between Bullish and Bearish situations.

5.1 Using our DJI (US30) Daily Chart, add the MACD with standard parameters

That is: Fast EMA = 12, Slow EMA = 26, MACD SMA = 9.

Where the main line in Silver and Signal Line in Red. Like this:



5.2. In Wall-street, we believe MACD Bars reflect the +ve and -ve Energy flow of the market price and the signal line indicates the start of the direction reversal of energy flow, which is usually act before the director reversal of the market price. In other words, an experienced TA can make use of MACD chart to identify the major price reversals before the actual reversal happens (that's why it is so important in TA world).

5.3 For what we have learnt in the lecture, what is the Bullish and Bearish Criteria for the signal crossing of MACD signal line?

5.4 Identify the signal crossing points, check the validity of these MACD signals.




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