The Mcginley Dynamic Forex indicator for the Metatrader 4 platform is an indicator based on moving averages that have a smoothing factor to reduce false signals.
Its trading signals are very simple:
- If the price action is above the Mcginley indicator: look for possible buy signals.
- If the price action is below the Mcginley indicator: look for possible sell signals
The indicator settings (period, smoothing factor) can be changed directly from the indicator settings tab.
As with any technical analysis tool, it is not recommended to use this moving average as the sole criterion for analyzing and opening positions in the market. Use it in conjunction with an oscillator type indicator (such as the MACD, or the stochastic oscillator) to build a complete trading system.
Theory: What is the Mcginley Dynamic indicator?
This technical indicator is a moving average that was created to follow the price trend without presenting the multiple false signals that appear when using regular moving averages as the SMA and EMA. It was created in 1990 by John Mcginley.
This is possible because traditional moving averages, such as SMAs and EMAs, have a fixed period, that is, a “fixed-speed”. Because of this, the biggest discrepancies between the price and these indicators appear when the market is moving very quickly, which can lead to unexpected results. This is why moving averages lag behind market price action. The price velocity is not consistent and prices often speed up and slow down. Traditional moving averages do not take this feature into account, on the contrary, the Mcginley indicator corrects the reaction speed by adjusting to the market price action.
This indicator can be used as a substitute for traditional moving averages in order to confirm the current market trend or to get signals of moving averages crosses.
Example of the Mcginley Dynamic indicator for MT4
The H1 price chart of the EUR/USD currency pair below presents the Mcginley Dynamic indicator in action.
General features of the indicator
- Recommended currency pairs: All, including major and minor currency pairs.
- Trading platform: It is a custom indicator based on the Mcginley Dynamic technical indicator, which was developed for the Metatrader 4 platform, therefore it can only be used in this application (see list of brokers with MT4).
- Indicator type: It is a trend indicator based on moving averages.
- Recommended time frames: 1 minute, 5 minutes, 15 minutes, 30 minutes, 1 hour, 4 hours, 1 day, 1 week, 1 month.
- Indicator customization options: Variables (# of periods, smoothing) colors, width and style.
You can download this indicator at no cost at the following link:
Trading signals of the Mcginley Dynamic Indicator For MT4
The signals of the Mcginley dynamic indicator are easy to interpret and are as follows:
- Buy signal: A buy position is opened when the price crosses and closes above the Mcginley indicator line from below (bullish signal).
- Sell signal: A sell position is opened when the price crosses and closes below the Mcginley indicator line from above (bearish signal).
- Trade Exit: Close the open trade when an opposite signal occurs, or use your own method for closing positions based on your risk management.
Copy and paste the mcginley-dynamic-indicator.mq4 file into the MQL4 indicators folder of the Metatrader 4 trading platform.
You can access this folder from the top menu as follows:
File> Open data folder> MQL4> Indicators (paste here)