In this article, I will select a series of indicators useful for trading gold to use on MetaTrader4. You will be able to download for free all the indicators that I will list for you. But first, I want to make some background on gold trading in CFDs.
Gold is one of the most traded commodities in the world. It is generally better to invest in gold rather than trading, as gold is considered a safe haven.
Short-term gold trading may not be a good idea if you are not really an expert. At the same time, making a long-term investment in gold using CFDs is a bad choice.
Gold CFDs traded on MetaTrader4 are short-term trading tools. However, I am not talking about intraday or scalping. The time horizon for a Gold CFD trade on MetaTrader 4 should be a few days.
That said, let’s see what the best indicators to use to analyze Gold with MetaTrader4 are.
You will not have to use a single indicator; technical analysis is not reliable in itself, so relying on a single indicator can be misleading.
Analyzing the Gold with MetaTrader4
Cot ReportAnalyzing, the Cot Report, is always a good idea when trading commodities. The Cot Report tells you what big investors are doing and can give you a clear view of the trend.
You can analyze the Gold Cot Report on many sites; you could also download the data and analyze it by yourself on Excel.
It is also possible to analyze them on MetaTrader4 using this interesting free indicator.
But remember that the Cot Report is beneficial for those who invest in gold. If you are trading with CFDs, you will have to focus on the short term. However, it is a good idea not to open positions contrary to the trend.
MT4 MACD Candle Indicator
Commodities and gold are financial instruments that respond well to trend follower strategies. An indicator such as the MACD can be handy because it can capture the trend phases well.
This indicator is visualizing the interaction of two exponential moving averages. The fastest-moving average is 12 periods, while the slow is 26 periods.
Using an indicator such as the MACD candle indicator allows you to view the current trend immediately clearly. Whenever possible, I prefer to use technical indicators that color the candles red or green for directions. Having too many technical tools in separate windows can be annoying, and I like this indicator.
The MACD is very simple: the fast average will record, before the slower ones, the change in price directions and the crossing on the longer-term should identify the start of a trend.
The intersection between the two averages is displayed with the value “0” on the indicator. Above the zero lines, the trend is bullish, while below it is bearish.
Should we use a gold strength indicator?
After analyzing the direction of the trend, it is also possible to verify its strength. The most famous indicator for checking the power of a trend is the ADX which you can find by default in your MetaTrader4. I found this interesting MT4 indicator; it is a smoothed ADX. I always prefer to use smoothed indicators because they provide fewer false signals.
A smoothed indicator is none other than the indicator itself but represented by a moving average. Then a moving average of the ADX indicator line is created.
In practice, the more the ADX has a value greater than 20, the more the trend will be vital. It is essential to know the trend’s strength because we do not want to use trend follower strategies in low directionality. Unfortunately, the MACD alone cannot give us an indication of the strength of the gold trend.
As I told you at the beginning of this article, it is always necessary to use indicators to analyze the Gold. Creating a Gold trading strategy is very difficult, and many factors need to be taken into consideration.
How to trade Gold on MT4?
As I just told you, a trend follower strategy is the one that best suits gold trading on MetaTrader4. It is interesting to see what the primary macroeconomic trend is with the Cot Report. Through the MACD indicator, we confirm the trend with technical analysis.
At this point, however, we must decide when to enter the market. It is the most important and also the most challenging part. There is no perfect timing; there is no ideal MetaTrader4 indicator that gives you the correct signal.
I want to make you think about a straightforward concept using an example. We have analyzed the Gold Cot Report with our MetaTrader4, and it is bullish. We used the MACD Candle indicator, which confirms an uptrend. At this point, the only way to enter the market is to wait for a minor retracement.
Therefore, we will assume that in the event of a downturn, the trend will restart in the same direction, and we will try to take advantage of it. Which MT4 indicator could give us the proper signal for a long gold entry after a retracement?
RSI signal MT4 Indicator for Gold trading
The RSI is a handy indicator to signal a retracement. I found this proper RSI signal for MT4, which provides various fascinating settings.
Compared to a standard RSI, this MT4 indicator provides many valuable functions, such as the histogram version.
It is also possible to view three different periods in the same window and create a smoothed RSI.
I like the smoothed RSI version a lot because it avoids many false signals. In this article, I will explain how to prevent false signals with the Relative Strength Index.
It is also possible to use other oscillators as an input signal. We can use the Stochastic indicator or the Chandle Momentum.
In these two articles I’ll explain the differences and which could be the best:
As for gold, I think it is better to use the RSI indicator for MetaTrader that I showed you.
The best version is the smoothed and multi-timeframe one. One last tip is to use an RSI on a lower timeframe than the one in which the direction of the trend is observed.
I would check the Cot Report weekly, the trend with the MACD daily, and I would use the RSI on an hourly timeframe.
By lowering the timeframe of the RSI indicator, we can make a better entry on gold. In this way, however, remember that we will risk many more false signals. Unfortunately, however, when operating with CFDs, it is necessary to stay as little as possible inside trade and take some more stop losses.