Most Forex traders usually trade with the same approach, so it’s not surprising that most of them are struggling to make consistent profits. If you’re one of them, then I suggest that you start looking into the best Forex trading indicators out there – indicators that can help you understand what your competition isn’t seeing and give you an edge over the rest of the market. Here are 10 of the best Forex trading indicators you should be using if you want to make sure that you’re getting all the value out of your market analysis.
1. RSI (Relative Strength Index)
This indicator measures the strength of a stock by dividing the average of all up closes for the period by the average of all down closes for the period. So, if you have a reading that is 50, that means that there were an equal number of up days and down days. If it’s over 50, then more days closed higher than lower, and vice versa if it’s under 50.
The MACD is a trend-following momentum indicator that shows the relationship between two moving averages (a fast and slow one) of different periods. The MACD is expressed in a line graph where the lines are typically plotted on top of each other, so it can be easy to see when they cross. One example would be when the short-term line crosses above the longer-term line, this is called an uptrend or a bullish market.
3. Stochastic Oscillator
One of the best indicators to use when trading Forex is the Stochastic Oscillator. This indicator can help you determine if a currency is overbought or oversold, which can signal a trade opportunity. The Stochastic Oscillator will be above 20 when prices are high and below 20 when prices are low. When it reaches 80, that indicates that prices are oversold and ready for an upturn in price.
4. Moving Average Convergence Divergence (MACD)
MACD is a technical analysis tool that compares the difference between two moving averages to measure momentum. This indicator is characterized by its histogram, which oscillates above and below the zero line. When the fast-moving average (the shorter period) crosses over or under the slower-moving average (the longer period), this may indicate a change in trend.
5. Williams Percent Range (Williams %R)
Williams Percent Range (Williams %R) is an indicator used to determine whether a security’s price is above or below its recent highs and lows. It was created by Larry Williams in 1979. The values range between 0% – 100%. A value of 50% means that the security has been trading for half the time at prices above its recent highs, and for the other half of the time at prices below its recent lows.
6. Relative Strength Index (RSI)
One of the most popular indicators to use is the Relative Strength Index (RSI). This indicator tracks the speed and change in prices for an asset. When overbought, this means that an asset is about to drop and when oversold, this means that it’s about time for a rebound.
7. Commodity Channel Index (CCI)
One of the most popular forex trading indicators is the Commodity Channel Index (CCI). The CCI can be used to establish long-term support and resistance levels as well as identify entry and exit points. To calculate a CCI, you take the difference between two exponential moving averages, one of which is shifted in time by 20 periods.
8. Bollinger Bands®
Bollinger Bands® are one of the most popular and widely used technical indicators. The bands are a measure of volatility and act as trading bands by showing areas where prices are overbought or oversold. When prices rise up to the upper band, it suggests that there is less demand for the asset. When prices fall down to the lower band, it suggests that there is more supply than demand for the asset.
9. Average True Range (ATR)
ATR is a technical indicator that measures the volatility of a market. It can be used to measure the volatility of a stock, commodity, currency pair or any other financial instrument. There are many different types of ATR indicators, including exponential and simple moving average (SMA) indicators.
10. Rate Of Change (ROC)
Rate of Change is a popular technical indicator that measures the change in price over a specified period. It is used by traders to identify potential turning points in the market. A positive ROC value indicates that prices are rising over time, while a negative ROC value shows prices are falling.
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