When used correctly, forex trading indicators will help you gain great profits and higly increase your chance of profiting in the market. So how do you find and use these indicators and use them wisely?
First you will to know that there is no one indicators that can perform perfectly and shows a clear signal of a buy or sell signal. Every forex trading indicator generators either buy or sell or both signal. There are also a signal generate by these indicator and that is the noise signal. This is the signal that you do not want to follow as they are “fake” signals. However you will not know that they are fake signals unless you combine one or more indicators to work together in a chart. The indicators signals cancel of each other noises and produce a clearer buy and sell signals. You can only optimize your indicators to produce more accurate results but not the perfect results.
Trends are your friends when trading forex. You may also want at least one indicator to indicate the trend of the forex for you to follow. The most basic rule of trading is that you must never trade against the trend. Trading against the trending will risk you losing more easily.
Enough of explaining, let us see what are some of the most commonly used forex trading indicators around and how can it helping your trading.
The Simple Moving Averages is an indicator that uses a certain period of the closing prices and does some calculated averages to produce a value. This value joins up and make up a line. This line can be use to assist in your trading sessions.
The next used forex trading indicators is Bollinger Bands. This is a very useful indicator that shows which currency is overbought or oversold.
An oversold currency indicates the tendency to rise in value in any moment, while the overbought currency indicates the tendency to rise in value in any given moment. This can help the trader to catch what we call trend reverse.
The Relative Strenght Index or what is called RSI, also shows the oversold or overbought status of the currency. It is usually use as a main indicator of oversold and overbought signal other then Bollinger Bands or other oversold or overbought indicator.
When using forex trading indicators, there are no one indicator that perfect. It is all about exploring and experimenting with different combinations to get the best most accurate signals to profit in the market.