Technical indicators

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There are lots of technical indicators created by traders around the globe. A technical indicator is a mathematical formula applied to chart candle properties like open-, closed- high-, low- or current price. It gets a graphical representation for fast seeing and comparison. Some technical indicators of them are established as quasi-standard. Most of the chart platforms support these. Some broker platforms support technical indicators too but use them is is not recommend. don’t know any binary option broker who technical indicators are really useful implemented. The recommend chart software for technical indicators is Metatrader. It comes with lots of technical indicators out of the box and you can include free available indicators, change exists or creates your own ones. All following indicators are available in Metatrader too. Please note that no technical trader use only one indicator alone. There is no holy grail of any indicator. No indicators will win each trade and no strategy works in each market condition. You need to learn and train. This is only a small selection of the available indicators.


The alligator is full descripted in this post: Alligator trend-follow indicator strategy!

Moving average

To get the average of any numbers the mathematic way is simple add all and deviate through the count of all numbers. For example the average of the numbers 5, 6 and 10 is (5 + 6 + 10) = 21 / 3 = 7. The moving average is a trend-following indicator. There are 4 types of moving averages: The simple moving average (SMA), linar weighted moving average (LWMA), exponential moving average (EMA) and the smoothed moving average (SMMA). The simple moving average is the plain data like the calculation above. Linear weighted moving averages using for his computations for each candle a decrementing value. This is used as weight for the candle. With this the last candles have more weight than the old ones. The linear weighted moving average reacts faster at price changes than the simple moving average. The exponential moving average is similar to the weighted moving average but use an exponential decrementing value as weight. Older candles count still less than at a linear weighted moving average. The most used moving averages are simple and exponential moving averages. The classic use case is trend detection. Define an EMA with a short period, for example 50. After that define a second EMA with a long period, for example 100. If the short EMA above the long one, this asset has an uptrend, else it has a downtrend. More distance between the EMAs mean the trend is stronger. If both EMAs crossing the trend reverse.


Fast EMA(12, red) and slow EMA(26, blue) in Metatrader 4. When the fast red EMA is above the slow EMA the Assets price is at an uptrend, else it is in a downtrend. The technical indicator Moving Average Convergence/Divergence descripted below directly covers this function.

Moving Average Convergence/Divergence

The Moving Average Convergence/Divergence (MACD) is a technical indicator that use 2 – 3 moving averages. 2 EMAs with differently periods get applied at any price. The difference of the EMA with the short (fast) period and the EMA with the long (slow) period is the result of the MACD. It is another way to show the trend. If the result is positive the fast EMA is below the slow one, else the result is negative. The more away from zero the trend is stronger. Mostly a MACD is used with a additional SMA at the MACD result as trigger line. If the main line cross the trigger line a signal in the direction of the main line is generated. This is a very reliable indicator to profite from trend.


MACD(12,26,9) in Metatrader 4. These is shown as histiogram. When the red line cross the green MACD then the trend going probably in the other direction.  Avoid market condition where the MACD switch fast between positive and negative (undirectional trend) and where the signal line remain near the MACD. (Nearly constant trend). A good signal is generated when both lines makes a big circle like the 3., 4. and 7. cross over. To identify this signals you can use the OsMA descripted below. Don’t forget at a histiogram view that no signal is generated if the signal line cross the zero line as this isn’t the real MACD line.

Oscillator – Moving Average

The Oscillator of moving average (OsMA) is a technical indicator that use a MACD. It is simple the difference between MACD result and his signal line. This means it shows the distance between MACD and the signal. When the OsMA cross zero the signal line cross the MACD line.


A MACD(12,26,9) in the middle and a OsMA(12,26,9) below in Metatrader 4. If the distance between MACD and signal line grows the OsMA grow, if the signal line cross MACD the OsMA cross zero.

Awesome oscillator

The awesome oscillator (AO) is a technical indicator similar to the MACD. Other than the MACD he uses two SMA and not EMA to calculate his value. That’s means the awesome oscillator reacts more slowly to recent price changes. He doesn’t use a signal line. If the oscillator is higher the market moves more.


AO showed in Metatrader 4. It uses fixed periods.

Bollinger Bands

Bollinger bands got created by John Bollinger. It is one of the most used technical indicators. The base of bollinger bands is an moving average in the middle. Based on a deviation get a distance computed. This get subtracted and added to the base line. The idea behind is that a high or low price will return back to his average. Most trader speculate that when the price reach one of the bollinger bands a move back to the middle band is expected. If the price breaks out the bands a strong trend in the same direction is expected. If the bands get small a big move in any direction is expected. Bollinger band strategies are typical very reliable.


Bollinger bands(14,2.2) showed in Metatrader 4.

Relative Strength Index

The relative strength index (RSI) technical indicator calculate wheter an asset is overbought or oversold. Its value has the range between 0 and 100 %. Typical a value above 70 % means the asset is overbought, a value below 30 % means the asset is oversold. It uses the relation between the moving average of all bullish and the moving average of all bearish candles in a specific period. When an asset is overbought probably more traders sell her asset, when an asset is oversold probably more traders buy it.


RSI(14) showed in Metatrader 4. 30 % and 70 % of the RSI values is marked.


The indicator Fractals is in stock marketing often used to set an sell stop. He shows a simple chart platters. A upper Fractals occurs, if the two left and right candle sticks have a lower high than the checked one. Just like that occurs a lower Fractals, if the two left and right candle sticks have a higher low. Fractals showing good and simple Support/Resistance-levels. If the price touch a recently occurred Fractals, mostly the price return in the other direction. If the price breaks out of the Fractals sometimes the price move strong in the same direction of the breakout. The Support/Resistance level is the high of the candle sticks with upper Fractals, the Support/Resistance level of a lower Fractals is the low of the candle.


Fractals shown in Metatrader 4.

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