What are the Most Common Trend Trading Indicators?
Have you wondered why trend trading is one of the most popular trading strategies in the Forex market?
Following the momentum of the Forex market, traders are trying their level best to enter the market with their utmost expectations by trying out each type of trade. It goes beyond saying that there is no trend trading indicator that will boost your ability to becoming rich from Forex trading, but it takes your trading skills to place you at par. The popularity of trend trading is based on these 4 topmost indicators.
You probably are aware of this trend trading indicator. It is popularly abbreviated as RSI. It is a Forex trading oscillator which majors on overbought and oversold market conditions. It’s known for gauging the instances of excessive sentiment in the cases of trending market stocks. In explanation, you have seen that this indicator comes in handy where there are overbought and oversold conditions. Let’s say that you have a stock. If it reaches 70/100 on the RSI, the market condition as at that time is on the overbought side. There must be a correction so that that situation to give it normalcy. On the other hand, if your stock goes below 30/100 on the RSI, it is considered to be on the oversold side. The same condition should be subjected to correction.
Trend trading with RSI
This trend trading indicator is used by many Forex traders so that the strong trend stretches can be captured promptly. Well, see this example. Let’s assume your Forex Pair has a strong trend and has RSI of in between 55 and 65. Before the trend stops, this indicator will compliment its correction. That way, a downward correction gets easier.
This is a simple trend trading indicator. Its simplicity starts where you, as the trader use a progressive price. The price in this case may have been set for your most preferred period in terms of hours, days, weeks, months or even years. The average point on the moving average line is determined by the daily average. It is for this daily average that this indicator gives the trader an easy representation of the direction in which the price moves. That way, keeping track on past prizes is easily plotted. How the MA indicator is straight-forward. If the market price goes above 200 MA, the indicator denotes that as a long-term uptrend while if it goes below 200 MA, it is considered as a long-term downtrend. The angular position of the MA should always act as your guiding point. You’ll come across two scenarios. The price may be ranging or trending depending on the movement of the Moving Averages. The reason why this indicator is trusted by many traders is its provision to both support and resistance to the Forex price.
As its name suggests, this OBV Trend Indicator strikes a balance by gauging the volume trend. This is in the case for a security. The balance must be ensured since volume acts as a complimentary in determining the exact price of a trade trend. Let’s say, there are either low or high trades in terms of the numbers. A low number of trades that accompany a downward trend give trade support signal to that trend. Conversely, the vice versa is true when it comes to a high number of trades.
Moving Average Convergence Divergence (MACD)
The MACD Indicator popularly abbreviated is a trading oscillator. The indicator works by revolving around the zero value. A MACD is known for its two lines. These comprise the fast and slow lines. Buy signals are sent when the fast line of the MACD crosses above and through the slow line. Where the fast line crosses via or below the slow line, there are sell signals sent.
How to use the MACD Indicator:
This indicator is used to measure:
To use the MACD strategy well, you ought to note that the zero side should be the controller. By that, it means that when the trading trend is above zero for a specified period, the chances of the trend going higher are on the highest side. Conversely, the probability of the trading trend going down is high where there is a below zero in the MACD lines after being sustained over a longer period of the trading time.
Most Common Trend Trading Indicators
These common trend trading indicators can be used on any time frame. The most important take-away on these Indicators is that you have to find repeating patterns that these indicator show and capitalize on these repeating patterns. That’s how technical analysis is supposed to work to your favor and that’s what these indicators are supposed to do. The last thing you want to do is to get too caught up with how these indicators are calculated and the formulas behind it. Those are not important. Find and catch profitable repeating patterns. That’s your main responsibility as a trader. Good luck.
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