Recently, I’ve decided to educate myself about different alternatives of earning money. I researched the market and the Web. All options sound OK, but, in my opinion, the most approachable was Forex trading using MT4 platform (Meta Trader 4). As I’m not an expert yet, but, let’s say an advanced beginner, I wanted to share my journey through the process of installation and setting up the basics. I’ll continue posting about my experience with this subject.

So, let’s start…..

What is MT4 and how does it work
MetaTrader 4 is a trading platform used for trading on Forex, Binary Options, analysing financial markets and using tools like Expert Advisors. MT4 can be downloaded for free from their inventor’s website (MetaQuotes) or any other trading brokers’ websites. It’s very easy to install it. It will open with default parameters and immediately prompt the trader to open an account, which will be a demo account when users can practice first without losing their money.

This platform is set by default to trade on Forex and if the trader wishes to use Binary Options, additional software needs installation. Also, by default MT4 will open 4 chart windows showing different currency pairs. At the top of the screen, there is a Toolbar with many icons. There are also two Market Watch windows: Symbols and Tick Chart. Below that, there is a Navigator window where a trader can view his/her accounts, indicators set, as well as Expert Advisers and Scripts. At the bottom of the screen, there is the Terminal window which contains six tabs: Trade, Account History, Alerts, Mailbox, Experts and Journal.

MT4 gives an opportunity to choose tools and resources to analyse price of an asset, place and manage trades, and even implement automated trading techniques.

Charts and how to set them on MetaTrader 4
Charts show a pair price in trading. Today’s charts are called candlestick charts, where chart reflect short time outlook. Components of the candlestick are shown on the picture below. Every price chart can be customised to work for the trader’s preferences. By right-clicking and choosing “Preferences” it’s possible to change how the charts look like. In the “Colour Scheme” tab, the colour of each of the variables may be customised: background, foreground, grid and bar. In the “Commons” tab traders may choose if they want certain features to be included in the chart. Once it all has been set, it can be saved as a “Template”.

Fundamental analysis - what is it
Fundamental analysis is a study of everything that may influence the market and the assets’ price. The end goal of this analysis is to come up with a volume that investor can compare with the current price. This method is not widely used in Forex and Binary Options.

Technical analysis - what is it
Technical analysis is a most popular method of market analysis. It depends on using charts, tools and indicators to identify patterns that may suggest future chart activity. As there are many trading strategies, traders will take into account different variables and use different tools to analyse the charts.

Indicators are statistics used to help to analyse the market movements. In fundamental analysis, economic indicators are used. In technical analysis, technical indicators are used, which work by using current and past conditions to predict price patterns. They can be added to any chart by clicking “Add Indicator” icon and it will open a drop-down menu. Trader may choose from the indicators he/she wants to use and the inputs (i.e. moving average) might be changed or set in the default. Depending on the market the trader is investing into, different indicators will be needed and wanted. They help traders to identify the speed of the movement of the price by comparing prices over a certain period of time. These indicators usually compare the last closing price with the previous closing price. They are shown as a line below the price chart and oscillates when the price changes. Examples of this type of indicator will be Momentum, Relative Strength Index (RSI) or Stochastic.

Trend indicators
As market oscillates up and down, trend indicators find a price average to establish some kind of baseline. When price moves above the average, it’s called bullish uptrend. If the price moves below the average, it’s a bearish downtrend. That averaging is called smoothing, as it evens the oscillation to find the trend. The most popular trend indicators are Moving Averages. There are many indicators on the market, free and paid, and you need to choose the one that suits you most. I’ve recently bought and tried Trend Viper Indicator and I’m very happy as I won already a nice little amount of money.

It showed me exactly when to enter and when to exit. Of course, I had my stop losses set (once not very much correctly, but I fixed it and then it was better). I’ll keep testing it, as it brings expected results.

Volatility indicators
Volatility measures the amount and speed of which the price is moving up and down. In technical analysis, this indicator measures the rate of the price movement, regardless of its direction. This is based on the change in the lowest and highest prices. These indicators are helpful in showing what range of buying and selling is happening on the market at this particular moment, which may help traders to find a moment when the trend changes. The most popular indicator in this category is Bollinger Bands.

Volume indicators
They are often called bar analyser - they check the trading activity that is happening over the certain period of time, regardless of the price change. Similar to trend indicators, they based on some averaging. When volume level moves above the average, they indicate a strengthening of this trend or a confirmation of trading direction.

Time Frames
Different time frames can be set on the MT4 platform by selecting “Periods” icon M1 means one minute, M5 - five minutes, H1 - one hour and so on. Many traders watch their charts on a different time, to check the trend.

Drawing Tools
Different drawing tools can be used to enhance trader’s charts’ analysis. Vertical and/or horizontal lines, trend lines and Fibonacci Retracements can be drawn on charts. Each tool has an individual icon, which is located in the toolbar.

Connection Status
In the lower right corner, there is a connection status bar that shows if there is an internet connection established, so platform can receive market updates. It’s important to check if this is green before starting trading in order to have accurate settings and information.

Backtesting and how to do it
Backtesting means analysing strategy or expert advice from the end to the beginning of the particular trade in a particular time frame. Backtesting done by using MT4 backtest strategy will not be 100% accurate due to spread differences. In Forex spreads are always changing, while MT4 backtester uses the actual spreads. The main goal of the backtesting is to filter bad strategies and find out the good ones.

Then you need to forward test it again by placing small trades. If you have good results now, you know you have a winning strategy. But to actually perform a backtest, you need a historical data. From “Tools” and then “History Centre” you’ll need to choose a currencies pair and the time frame and download it. Then, it the “Expert Advisers” tool, you can choose the strategy that you wish to run. MetaQuotes MACD Sample is set by default, but it may be easily changed. Now, on the Symbol tab, you need to choose the same information that was downloaded (same currency pair and the same time frame). You need to also choose a model and the important thing is that each tick should be chosen to generate the most precise report. Spread used now will be the current spread, not the one that was at the time of the trade that we’re analysing, which is not 100% accurate, but gives a number of perspectives and the winning ratio. After clicking “start” the backtester will automatically analyse the system and will create a graph. A sound will be heard when the analysis is finished. In the “Report” tab you’ll find a conclusion of the strategy that was used.

Expert Advice
This is an automated programme used in MT4 trading. To create an expert, Meta Editor needs to be opened within the MT4 platform. There are few ways to do it: through Navigator window (right-click on Expert Advisor and create), through Tools in the Main Menu (select MetaQuotes Language Editor), by clicking diamond shaped icon on the Standard Toolbar, or by pressing F4 on the keyboard. After that, the Wizard will open. This Wizard allows creation of Expert Advisors, Custom Indicators, Scripts and DLLs. When General Properties window opens, user needs to specify some details: user Name for the expert, Author meaning developer’s name, Link to developer’s website, if applicable, and Parameters meaning the list of expert inputs. A new window will open and expert codes may be entered here using MQL4 programming language.

Strategy is a set of rules and objectives determining when a trader will take an action. Strategies include using indicators and setting trade filters and finding trade triggers. When trade filters will set up conditions of the trade, trade triggers will tell when exactly the action should be taken. When creating a strategy, trader needs to ask him/herself some important questions:

What moving average will be used (length and price point)
How far above the moving average the price needs to move in order to set a trigger?
If the price above the moving average hits the trigger, is the trade going to close at the end of that bar, or at the beginning of the new one?

From my personal view, MT4 trading is a good start if you want to get into trading market. Of course, demo accounts are crucial at first, but once you familiar with the basics, give it a go with a “real” account. I totally recommend using indicators, like Trend Viper, as they are a must. Happy trading, shall I say.

Author's Bio: 

I've been researching new aspects of making money. I like trading on demo accounts and started using indicators on the "real" accounts. I found that calmness and tools (indicators, trends, etc) helps and my decissions have been right. I wanted to share this.