Best Forex Trading Indicators - Forex Indicators Every Trader Should Know

FinanceStocks, Bond & Forex

  • Author Monica Hendrix
  • Published February 13, 2009
  • Word count 597

If you want a Forex trading strategy for success, then you will need some Forex Indicators, to help you achieve better marketing timing with your trading signals...

Here we are going to look at the best Forex trading Indicators; you can combine for bigger Forex Profits.

There is no one indicator that works all of the time, you need to combine a few that compliment each other. here we show which ones to use and how to combine them.

The Best Forex indicators below, are all easy to learn as there visual, you don't need to know the calculation behind them, just the set up to look for.

Bollinger Bands

Measure the volatility of price. The indicator consists of three bands the middle band is a simple moving average and there is a band either side which show how volatile the market is - so what use is that?

When volatility is high and prices are at the outer bands, you will probably get a retracement back to the average (the mid band) so you can look to take contrary trades against on high volatility. Also the mid band acts as value in strong trends, so you can buy and sell back to it; this simple strategy is very effective.

Bollinger bands give you trading set ups - but you should not execute your trading signals without confirming them with some momentum indicators.

The Stochastic

This is a great momentum indicator for market timing and one every trader should know. It can be used to show if momentum is weak, strong, or a market is overbought or oversold.

A simple strategy is to trade crossovers of the two stochastic lines and these can be for contrary trades or trend following. It's a very simple Forex trading indicator to use and very effective.

Relative Strength Index RSI

Developed by trading legend Wells Wilder, this indicator gives you an indication of how strong a trend is which you can see at glance.

If the RSI Supports your perception of the trend, you stay with it, when the RSI diverges from the trend you have a potential trading opportunity, to trade the other way, or lock in some profits.

Average Directional Movement ADX

Another great Wells Wilder trading indicator. The ADX gives an indication if the market is in a trend or consolidating. The ADX line will also help you stay with all the best trends and also acts as a great profit taking indicator:

As soon as the ADX line rises above 40 and turns down you have a profit taking signal, this has made me and saved me tens of thousands of dollars over my trading career!

Moving Averages

Simple moving averages have gone out of fashion but there one of the most effective indicators you can use - Why?

Because all short term price spikes are temporary and come back to averages or value, one of the most effective averages for this is the 20 day MA. In long term trends, trailing a stop behind the 40 day MA is very effective.

Combine them for Big Profits

I have used the above best Forex trading indicators for over 20 years and made a lot of money with them.

I simply use the Bollinger Band and support and resistance to isolate potential opportunities and use the RSI and stochastic to confirm the moves. The ADX helps me without determining the trend and acts as a profit taking signal and moving averages help me with stops and targets.

Learn these best Forex trading indicators and they could help you make bigger profits too!

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LC · 15 years ago
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