Today’s lesson focuses on using indicators within the Deriv MT5 platform to strengthen your technical analysis and refine your trading decisions. When applied and customized correctly, indicators serve as vital tools, helping you interpret price trends and potential turning points more effectively.

What are indicators?

Indicators are mathematical algorithms that process historical price, volume, or volatility data to provide visual cues about likely market direction and conditions. These tools help traders uncover patterns that are not always clear from price alone, improving the ability to forecast possible moves.

Categories of indicators on Deriv MT5

Deriv MT5 offers a rich set of built-in indicators, which are grouped into several main types:

Trend Indicators

• Moving Averages: Smooth out price action to reveal underlying market direction.
  
  • Simple Moving Average (SMA): Calculates the average price over a set period, with equal weight to all data points.
  • Exponential Moving Average (EMA): Places more weight on recent prices, adjusting faster to new trends.
  • Smoothed Moving Average: Damps down volatility for a clearer, longer-term perspective.
  • Linear Weighted Moving Average: Applies progressively greater weighting to newer prices, making it particularly sensitive to recent changes.
• Bollinger Bands: Composed of a central moving average plus upper and lower bands that expand and contract based on market volatility. These bands help signal when a market is unusually quiet or alert you to potential breakouts and reversals.
• Average Directional Movement Index (ADX): Measures the strength of a trend, regardless of its direction, and uses accompanying lines (+DI and -DI) to indicate bullish or bearish momentum.

Oscillators

• Relative Strength Index (RSI): Moves between zero and 100, helping spot overbought conditions (typically above 70) where a reversal may occur, or oversold zones (below 30) indicating potential for a bounce.
• Average True Range (ATR): Gages volatility by showing the average price movement range over a given time, with higher readings reflecting increased market activity.

Volume Indicators

• On-Balance Volume (OBV): Tracks volume flow to show when buyers or sellers dominate, confirming emerging price trends or raising caution about a reversal.

Bill Williams Indicators

• Alligator: Uses three shifting moving averages to visualize trend strength and direction. When all three lines are aligned and separated, a strong trend is present; confusion or convergence signals sideways activity.

Customizing and Applying Indicators

After adding an indicator to your chart, right-click on it and open the ‘Properties’ menu to fine-tune settings:

• Parameters tab: Define initial settings, such as calculation period or method and basic appearance options.
• Levels tab: Add or edit horizontal levels for clarity (especially helpful for RSI and similar oscillators).
• Visualization tab: Choose which chart timeframes will display the indicator, so it appears only on your selected views.
• Scale and Colors tabs: Adjust how indicator values are plotted and set your preferred colors or line thicknesses for easy analysis.

Summary

Using a variety of indicators—customized to match your strategy—gives you extra clarity in technical analysis, better risk management, and the ability to spot entry and exit opportunities quickly. Practice applying these tools in your Deriv MT5 demo account to discover which best fit your approach.