Trading with the MT4 news indicator
Trading forex based on economic events such as fundamental news releases can give traders an edge in the markets. Knowing what type of events are lined for the day allows traders not just with trading opportunities but also knowing when to stay out of the markets.
Many a times, day traders and scalpers do not pay much attention to the fundamental news that comes out during the day. Traders tend to focus more on the technical aspect of trading. However, this can lead to losses especially if you are trading in the short term.
Economic news events tend to bring a lot of volatility depending on the type of news being released. Investors tend to shift their expectations based on incoming data.
At the very core of news events is the fact that economic indicators can shape the central bank’s outlook on interest rates. Interest rates are the key for any markets and the prices are driven by investors based on their expectations of where the short term rates will be.
For a regular technical analysis based trader, not paying attention to such events could lead to big losses on a day to day basis.
Not all news events bring the same amount of volatility.
For example, if you look to an economic calendar such as Forexfactory.com you will find that the news events are categorized into different types of events. Some are high impact events while others are low impact events.
Ignoring these can be like trading at your own risk and trading in the blind. An unexpected news outcome could lead to a strong movement in the underlying price in the spot markets. These moves happen as investors seek a big shift or when the economy posts a sharp turn.
Up until now, traders had to combine various aspects to trade with the news. For example, traders typically tend to look at an economic calendar and then base their trading around these news releases.
However, with the MT4 news indicator, you do not have to follow around multiple websites. You can simply install the news indicator on your MT4 platform and have all the events showing up on your price charts if you are looking for news based trading.
What is news based trading?
News based trading or trading based on economic events is a strategy used by many day traders. The basic criteria with such a method of trading is to wait for the markets to near a major news release.
Because big impact news releases have a lot of volatility in the markets, you can expect to see large movements in the price charts. For short term day traders, this volatility can lead to the potential to make big profits within a short period of time.
In this aspect, the MT4 news indicator is a handy tool that will alert you to upcoming economic reports. This way, traders are better prepared and are able to plan their day trading strategy accordingly.
News based trading combines a mix of technical and fundamental analysis.
Traders wait for the outcome of the news release and if there is a confluence with their trading systems, positions are taken.
Of course, there are some risks with this approach. One of the reasons is that around news releases, the spreads tend to widen. This can lead to abnormal positions being executed in the market. Most news based trading strategies require to you buy or sell at market. Therefore, leading to wrong price fills.
Also, many forex brokers do not allow news based trading. It is always best to check with your broker’s terms and conditions before you get to this kind of trading.
This type of trading, as mentioned is only suitable for short term day traders and scalpers. If you are swing trading, it is quite possible that your entry and exit levels are wide enough to absorb the swings in the markets.
Trends take a lot of time to change. Therefore, when you are swing trading, the news events based on the outcome take a while for the trend to change. At the end of the day, it is the general outcome of the news releases and the impact it has on central bank’s monetary policy decisions that will decide the outcome of the trends.
But for short term, news based trading is quite a profitable way to trade.
How to use the MT4 news indicator?
The MT4 news indicator can be downloaded free of cost. You can install this indicator the same way as you would install any other technical indicator. Once installed into your MT4 folder, you can then refresh the navigator and drag and drop the MT4 news indicator onto your charts.
MT4 News indicator configuration
After you install the MT4 news indicator, you need to set up some configuration details. Firstly, you should allow the DLL imports settings. This can be found by clicking on the Common tab on the above settings window.
Check the box that asks you to import DLL settings. It is also ideal if you input the Forexfactory.com website into the settings so that your MT4 trading terminal is able to import data from the website.
The first setting is set to false. You need to change this to true to have the indicator display the economic events on the active chart that you are using. It is advisable to not have too many windows open as the indicator can slow down your computer and your trading terminal quite easily.
The remainder of the settings include various cosmetic changes that you can apply to the chart. After you are done with configuring the MT4 news indicator, you should be able to see the indicator displaying the day’s economic events on the bottom left side of your screen.
MT4 news indicator
The vertical lines display the time period when the expected news event is due to be released. You can also change the color settings for these vertical lines to differentiate between high impact and low impact news releases.
The MT4 news indicator automatically picks up the news events based on the currency pair to which the indicator is applied to. For example, in the above chart we installed the MT4 news indicator on the EURUSD chart.
Therefore, the indicator picks up the economic events concerning the Euro and the USD currency. This can be a great way to eliminate the noise and to focus on the currency pair that you are trading.
Once the indicator is all set up, you can then add your own technical trading systems and wait for price to near the news event following which you can trade the markets quite easily.
The Forexfactory indicator download
The MT4 news indicator is also known as the forexfactory indicator. This is because the data comes from the forexfactor.com website which gives a free economic calendar for traders to view the day’s agenda.
You can also eliminate the use of the forexfactory indicator by having the economic calendar open on your browser window. However, if you are just starting out with trading then it is advisable to use the forexfactory indicator so you have all the information in one single place and do not need to switch between windows.
The forexfactory economic calendar looks like the picture below.
Forexfactory economic news calendar
As the name suggests, the economic calendar will show you a list of the day’s economic events. The forex markets never sleep and there is always some news event or the other happening.
In this aspect, the forexfactory indicator allows you to stay on top of the markets by displaying the day’s important events right on your chart. You do not have to do anything more than just installing the indicator and it does all the work for you.
As mentioned, there are different types of news events. You can configure this by changing the colors of the vertical lines representing the level of impact or importance of the news event.
For example, traders typically use a red color for high impact events and other colors for medium or low impact news releases. You can easily filter out the data so you can focus only on the big news releases that will bring volatility to the markets that you are trading.
Some of the common event types that you must have on your chart includes economic releases around GDP reports, inflation data and unemployment rates. These are the three main types of economic events that will shape the decision of the central banks.
Central banks across the major economies have a dual mandate of targeting 2% inflation rate and to maintain a low unemployment rate. Therefore, the monthly or quarterly data that covers these aspects can be important as it can potentially change the forward guidance given by central banks.
Interest rates do not change out of the blue. They are driven by key economic fundamentals. These fundamental news events are therefore represented by the day to day economic calendar agenda.
While you can trade the above mentioned news releases in isolation, having an understanding of the trends can help you to potentially guess with a reasonable amount as to what the central banks would do next.
Therefore, in this aspect, the forexfactory economic indicator is a handy tool that will allow you to keep track on the economic events that tend to play a role in the central bank decision making and also allows you to determine the changing trends in the markets.
Another common type of news event that you should follow is the central bank news speeches. Speeches given by key officials from the central bank who determine the interest rates can give great insights into their thinking and what their decision will be on interest rates.
News based trading also partly focuses on the often used phrase of buy the rumor, sell the news. In this method, the markets tend to rise in anticipation of a major news event only to sell off after the release. This is a commonly occurring phenomenon especially around some of the high impact events.
Therefore, traders can use the forexfactory economic indicator for the MT4 platform as a way to stay on top of the markets and to understand the underlying trends and the volatility in the markets.
MT4 News indicator – Conclusion
In conclusion, the news based trading indicator allows traders to focus on their price charts. By displaying the current day’s news events line up, traders do not have to hop from one website to another.
The MT4 news indicator takes the data from the forexfactory.com website and displays it on your chart. The forexfactory economic calendar is available free of cost. The MT4 news indicator allows traders to develop a news based trading strategy.
This is sometimes referred to as a event driven trading strategy. Traders are taken depending on the outcome of the economic release in question. Some of the common economic news events that you can trade include the U.S. nonfarm payrolls, GDP reports or inflation data.
Central bank speeches which have become an important event in driving volatility and shaping the expectation for interest rates are also displayed on your chart. The MT4 news indicator takes into account the day’s economic events and allows traders to plan their trading strategy ahead of time.
With the MT4 news indicator you do not have to trade in the blind anymore. Regardless of what your trading approach is, you can use the news indicator as a way to alert yourself to upcoming economic events or simply use the schedule as a way to plan your trading day.
If you are just getting started with forex trading, it is highly recommended that you make use of the MT4 news indicator.
This will make things a lot easier for you and also lays the groundwork for you to understand the relationship between the fundamentals and the technical analysis of the forex markets.
You can start to develop a robust trading strategy when you begin combining the fundamental and he technical analysis of trading the markets.