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Forex Indicators

Forex Trading Indicators

You can use a variety of Forex trading indicators with your Forex charts and here are some tips on how to use them to increase the profitability of YOUR Forex trading strategy.

The first point to keep in mind is not to use too many, if you do you will complicate your trading system and it will break, less is more in Forex trading as your system will be more robust. If you want a perfect example of this, look at the free trading system we have on this site in the free info section.

When using Forex trading indicators, its best to use them in conjunction with simple bar charts on a Forex chart. While it may seem old fashioned, the chart itself confirms the reality of price change and shows you important value points in terms of support and resistance. So use your bar charts to see areas of value and use indicators as back up.

All markets move to sentiment and while we all have the same facts to look at, we will all draw different conclusions from what we see and it’s a fact that humans will spike prices to far from fair value, as greed and fear come into play. No short term price spike lasts long and prices will return to an average or fair value. Markets have high volatility when emotions come into play and then become less volatile as greed and fear subside.

An essential indicator to measure volatility is the Bollinger Band and you use it to measure volatility, it’s not a leading indicator but it’s a great one to gauge the volatility of the market.

As prices will normally return to an average price, you need to look at simple moving averages and two great ones are the 20 and 40 day moving average. If you look at any Forex trend, notice how to the 20 day moving average acts as an area of value. You will often see prices move away from this average, in both up and down trends and then return to it, so you can buy into it in an up trend and sell into it in a downtrend. They will sometimes go further to the 40 day MA, which very often acts as the last defence of the trend.

You can’t however just simply look to buy or sell into a moving average you need some momentum indicators to time your move. Two of the best are the stochastic and the Relative Strength Index (RSI); these indicators will only take you an hour or so to learn and are great indicators for timing your trading signals.

There are numerous other indicators out there, but the above 4 we think are the best Forex trading indicators for any novice to start with.  

 
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