Some of the Best Indicators for your Forex Charts

Posted by admin 11/09/2013 Comments are off 1220 views

Some of the Best Indicators for your Forex Charts

Are you an aspiring technical analyst?  We take a look at the best indicators you should have on your forex charts.

As a technical analyst, the bulk of your trading decisions will be made off your forex charts.  It is from these charts that you will be able to see what the market is doing at any given time. If you decide to look purely at the naked charts, you may find it almost impossible to point out where the market is headed to at any given point in time.  This explains the need to use several indicators to determine the direction of the market.

The Best Indicators for your Forex Charts

  • Moving averages

Moving averages are undeniably the most used indicators around.  Every technical analyst either makes use of a moving average or has made use of it in the past. They are so popular because of their efficiency. There are several kinds of moving averages, so you need to find the particular type that you can make use of effectively.   If you deploy the moving averages properly, you should be able to use them to find out when a trend is about to end, and when a new one is about to start.  You can equally use the moving averages as support and resistance levels by trading bounces and breakthroughs. Generally, moving averages are very helpful tools.

  • Bollinger bands

The Bollinger band is a three pronged moving average. The three arms are the upper Bollinger, the lower Bollinger and the middle Bollinger.  This tool is used to determine when the market is ranging and when it is trending. If the bands are tight, it shows a ranging market, a scenario known as Bollinger squeeze. When price breaks out of the squeeze it shows that a new trend is likely about to begin.

  • The MACD

The Moving Average Convergence Divergence is another indicator used by traders to know when a trend is gaining in strength and when it is tapering off. The principle behind this indicator is to simply watch the bars that appear with every new candle. If you are coming from a downtrend and a fresh bar appears above the MACD 0 line, then an uptrend is about to start. If the bars keep growing longer, it shows an increase in the strength of the trend. The same applies when you are coming from an uptrend.

All the indicators listed here can be found on a typical Metatrader 4 platform, so you only need to locate it and drop it onto your screen. If you do not understand how any of them works, you can always go online and read up on the indicator in question. You will also be able to learn the various combinations you can use, as in the case of the moving averages.  One thing you must keep in mind, though, regardless of how good a strategy looks in a back test, is that no matter what your indicators show, it is never a good idea to disregard your money management principles. Always remember that no trading strategy is perfect, so your money management is often your only anchor for safe trading.

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