Before entering a trade, you should consider several factors, including market sentiment and technical indicators. These technical indicators can be very useful for beginners if they are used properly. You should be able make an informed decision about the best trading strategy for you, based on your trading style, using forex indicators.
Top Technical Indicators for Forex Trading
Forex trading can be made easier by using a variety of technical indicators. It can also be used to indicate the direction of a market trend, other characteristics of the market, and levels of momentum. These indicators are calculated from market data, such as trading volumes, exchange rates, open interest, and exchange rate.
Indicators of trends These are the ones that give an indication of the direction of currency pairs’ movements. They are often superimposed onto charts.
Moving Averages This is a lagging issue. Smoothening rate movements can be achieved by using an indicator
Bollinger Bands This is a group of bands, with two of them standing up and one down. The moving averages act as a volatility indicator and trend.
Williams Alligator Indicator Three sets of moving averages, each with a different time period. This can also be used to create trading signals.
Parabolic Stop and Reverse– Signs that are drawn either below or above the line. This is ideal for market reversals.
It can be found at the bottom of MT4 charts in the indicator window. Oscillators like RSI are designed to react to user-selected areas that are overbought or oversold. MACD doesn’t behave like this.
Relative Strength Index (RSI). It is a strength oscillator that compares the size of the most recent gains to the losses over a specific period.
Average Directional Movement Index (ADX). It is a trend strength indicator that is also a lagging indicator, especially when it uses negative and positive Directional Indidicators (+DI) and -DI.
Moving Average Convergence Divergence Observator (MACD). It is a momentum oscillator, which works by computing the difference between 2 moving averages. MACD signals cross- or crossovers.
Williams Percent Range (%R). It is a momentum indicator which uses an upside-down scale to identify oversold or overbought levels.
Stochastics Oscillatory. It is a bounded momentum indicator that allows you to compare close exchange rates into the range over time.
Momentum Oscillator. It is an indicator that measures the market’s rate of change.
Balance Volume. It is an unbounded indicator that compares leverage trading Forex volumes. It can also be used to identify breakouts or reversals.
These indicators can be used to determine the economic health of a country.
- Monetary Policy Decisions and Speeches of the Central Bank, as well as Rate Statements
- Employment Numbers (Unemployment Rates, Payrolls, and Unemployment Claims).
- Gross Domestic Product (GDP).
- Trade Balance
- Retail Sales
- Consumer and Producer Price Indexes, (CPI/PPI)
- Consumer Confidence and Purchasing Manager Index (PMI).
Indicators of market sentiment
- Report on the commitment of traders (COT).
- Futures and Options: Open Interest
- Survey of Trader Sentiment