Three Most Powerful Indicators In The Forex Market

Discussion in 'General Trading Discussion' started by Adam Smith, Apr 13, 2018.

  1. Adam Smith

    Adam Smith Member

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    The new traders are always fascinated with the retail trading industry. They are continuously looking to find the Holy Grail. They even buy an expensive trading system from the professionals yet fails to make money. Buying trading strategy and automated software will not help you unless you understand how this market works. You have to learn Forex trading before you think of the profit factors from this industry. Many intermediate traders in the United Kingdom often says indicators are nothing but a waste of time. But this is not entirely true. If you can learn the proper use of indicators it can save a huge amount of money and time. Though there are thousands of indicators today we will discuss the top three indicators which every trader should use. But always remember, indicators are nothing but helping tools.


    100 and 200 day SMA

    SMA stands for simple moving average. Majority of the traders uses the simple moving average to find the trend reversal in the market. But today we will tell you how to use the 100 and 200 days SMA to find the most profitable trades. The expert traders use the daily 100 and 200 SMA to find the dynamic support and resistance level of the market. You might be thinking that we will tell you about cross overtrading strategy but we won’t. We will use these two SMA to find the key support and resistance level. But instead of placing pending orders, you have to use the Japanese candlestick pattern. The use of Japanese candlestick pattern in the currency market is often referred as a price action trading strategy. By using the 100 and 200 SMA along with price action trading signal, you can greatly improve your trading system. But before you jump into the real market back test your trading system in the demo trading account.


    RSI indicators

    RSI stands for relative strength index. We all know the trend is our friend. The professional traders are always trying hard to find the market trend in their online trading platform. They even measure the strength of the trend prior to their trade execution. But how do you measure the overall strength of the market trend? The idea is very simple. You can use the RSI indicators in the daily time frame. If the value of the RSI indicator is above 70 you can assume that the bulls are exhausted and the price of the currency pair might drop in near future. Similarly, when you get reading below 30 in the RSI indicator you can assume the bears are losing control of the market. So get ready to execute buy orders. But never trade the market based on the indicators reading only. Use the support and resistance level to validate your trade setup.


    Bollinger band indicators

    Bollinger band indicator is very popular among the scalpers. It gives the dynamic support and resistance level to the traders. But most novice traders make one common mistake in Bollinger band trading. They use it in the lower time frame. In the lower time frame, you have to deal with lots false trade setups. So remove any lower time frame data from your trading platform. Use the 4 hour or daily time frame to find the key support and resistance level. Instead of depending on the Bollinger bands reading, you also need to use the RSI indicator to measure the market volatility. Never trade the minor support and resistance level of the market. If you do so, you will be losing a huge amount of money.


    So far you have read about the three most important indicators in the Forex market. But when you use these indicators consider this as your helping tools only. Use other factors to assess the quality of the trade setup. But no matter which indicators you use, limit your risk exposure by using proper money management.
     

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