There is pressure when trading a funded account with a prop firm. Your personal money is no longer the only thing at risk. Every choice you make counts and the resources you use have a significant impact on how well you achieve. This is why it’s so important to know which indicators to utilize on MetaTrader 5 (MT5).
Now, this may seem a bit difficult if you’re new to MT5 or haven’t really been involved in indicators previously. Not to mention all of the custom tools available, MT5 comes with an insane amount of built-in features. The key query thus becomes: Which indicators are truly useful in a prop trading setting when consistency, risk, and performance are the most important factors?
Let’s discuss in detail.
Why Indicators Matter (Especially in Funded Accounts)
It’s not magic on indicators. By itself, they won’t turn a profit for you. However, if you utilize them properly, as part of a well-planned strategy then they can help you remain on the correct side of the trend, prevent fakeouts, and better timing entry.
In prop trading, those benefits are invaluable. You’re attempting to reach profit goals and follow strict drawdown limitations, not merely to exist. When indicators are carefully selected, the probabilities are somewhat higher in your favor.
Moving Averages (EMA and SMA)
Moving averages are probably the most used indicators in the game.
- Simple Moving Average (SMA): This gives you a clean average over a set period. Great for smoothing out the noise.
- Exponential Moving Average (EMA): This one reacts faster to price changes which is a big plus if you’re a short-term trader.
How Funded Traders Use It:
The 50 EMA and 200 EMA combination is crucial for trend confirmation in prop trading. When does the 50 surpass the 200? That is a bullish indication, commonly known as a golden cross. What about when it falls below? It is indeed a death cross.
For scalpers or day traders, shorter EMAs, such as the 9 or 21, are very useful on shorter periods, such as the 5-minute or 15-minute. They assist you in identifying such microtrends early on.
Relative Strength Index (RSI)
RSI measures momentum and shows you when something’s overbought or oversold. It’s plotted on a scale from 0 to 100 with the key levels being 70 (overbought) and 30 (oversold).
Why It Works for Funded Traders:
You’re most likely trading emotionally if you’ve reached your daily loss cap twice this week. You can slow down with RSI. RSI can inform you whether you’re purchasing too late if a market appears to be in a strong rise. Conversely, it may prevent you from selling during a rebound.
RSI functions as an internal sanity check in funded accounts where control is crucial.
MACD (Moving Average Convergence Divergence)
Another momentum-based MT5 indicator that is a bit more advanced than RSI is MACD. It consists of a histogram in addition to two lines: the signal line and the MACD line.
The key to understanding changes in momentum is the link between short-term and long-term moving averages.
Best Use Case:
If you’re a swing trader working with a funded prop account then MACD helps you avoid chasing tops and bottoms. Look for the MACD line crossing above the signal line as a bullish signal and below it for bearish moves.
And those histogram bars? They show how strong or weak the momentum is. Shrinking bars? Momentum’s fading. That can be your cue to tighten stops or exit.
Bollinger Bands
Created by John Bollinger, these bands help you visualize volatility in the market. You get three lines:
- A middle SMA (usually 20)
- An upper band
- A lower band
The upper and lower bands expand or contract based on volatility.
Why It Matters for Prop Traders:
Funded firms love consistent, low-risk trading. Bollinger Bands help you identify when the market is too stretched which can signal a reversal or consolidation. If price touches or breaks the upper band and RSI is above 70? That’s probably a high-probability pullback zone.
You can also use Bollinger Squeeze strategies to catch breakout moves—great for passing challenges or hitting profit targets quickly.
Volume Profile (Custom Indicator)
This one’s not built into MT5 by default but you can easily find good Volume Profile indicators online (both free and paid). Volume Profile shows you where most of the trading activity has taken place at specific price levels—not just over time but across price zones.
Why Funded Traders Love It:
Volume tells a different story than price alone. If you’re trading support and resistance zones, Volume Profile shows you where the “smart money” is playing. It helps confirm whether a breakout is legit or just a fake move.
In high-stakes funded trading, you can’t afford to chase every candle. Volume Profile gives you the edge of seeing where the market cares most.
ATR (Average True Range)
Let’s talk risk—because that’s what separates the funded trader from the gambler.
ATR measures market volatility. It doesn’t tell you direction but it does show how much the price typically moves during a set period.
What Makes ATR Useful:
Funded accounts usually have strict drawdown rules. ATR helps you size your positions more intelligently. For example, if you’re trading gold and the ATR says the average move in the last 14 candles is 20 pips, you can set stops and targets that aren’t too tight or too wide.
You’ll also avoid entering positions during dead zones or highly volatile, risky sessions.
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