Best Technical Indicators for Forex Beginners by Danielle Franklin
There tones of technical indicators available for forex traders. The question is, which ones are actually working? How many should you include in your strategy? Does the rule the more the matter apply? Or you should keep it simple instead? What are the right forex tools for every day trading?
Even when there are all these elaborate choices of indicators available today, it doesn’t mean you should use them all. In fact, using too many indicators will only confuse you and most probably lead to bad trading decisions.
So, instead of making forex even more complicated than it already is, focus on combining the right set of indicators that will actually show useful information about the market and confirm your ideas about trades.
Why is it important not to use indicators that show the same data? Think about this, instead of getting a so-called “signal confirmation”, you basically look at the duplicated data, which by no means confirms anything.
Below are the indicators that can be used together to confirm your trading decisions:
1. Stochastic – the best timing tool (crossovers with bullish/bearish divergence, chart resistance/support, overbought/oversold levels).
2. Relative Strength Index (RSI) – shows the strength of the trend.
3. The Bollinger Band – shows volatility of the price.
4. Moving Averages – shows when to load in new trades or show the level to trail the stop.
There are other powerful technical indicators such as ADX line and, of course, MACD, however with the above 4 indicators, you are set towards a great trading strategy and profits.
Keep in mind that there is no short cut in forex. You have to blend into real trading and see those indicators in action. Practice, make mistakes, write it down, analyze what went wrong and get back on that bull! Experience is the only reliable indicator you will ever get!
It’s all about combining indicators for profit – no indicator works on its own, so you need indicators that complement each other. Now that you know which indicators to include in your daily trading, let’s see what can happen if you don’t use your indicators correctly.
Below is couple of tips to use the indicators correctly:
1. Don’t use indicators on meaningless data – indicators are pretty much useless on short time frame charts, since daily volatility is pretty much random and no technical indicator will be in any way useful.
2. Make sure you have enough evidence that price momentum is indicating the levels will hold. Good momentum indicators are ones such as, the stochastic and Relative Strength Index (RSI) and if used with pivot points or moving averages, you have a powerful combination
3. Don’t try to predict market direction. It is impossible to predict turning points. PERIOD! What you need to do is to find a confirmation and act accordingly. Only this way you can increase your chances of winning.
Forex trading is not a guessing game, fortune predicting system or perfect gambling technique. The above mentioned indicators have been doing their job for ages for many traders and still are equally effective today. These are the best forex trading indicators and if used correctly can dramatically improve your profits and decrease risks.
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