In the process of trading on the Forex market, a variety of tools are used to achieve the desired results.
If 50 years ago trading was a private arrangement, now it is a largely automated process that is often regulated by bots.
Among the tools and forex indicators are one of the main ones. They allow you to identify good points to enter the market or to sell assets.
They are common not only among Forex traders, but also among traders of the stock and derivatives markets.
Let’s find out what forex indicators are, how they help in trader trading, and what are their distinctive features.
What are forex indicators?
Forex indicators are tools that receive data on price or volume, then apply a certain formula to them, and then convert this data into visual information on a chart. By analyzing price data, indicators provide information on trend strength, momentum strength, potential market reversals, and entry points.
Indicators do not add or subtract anything from price information. Thus, an experienced trader will always get the same information from the readings of his indicators, as well as from the analysis of the price movement on the chart.
Problems arise when traders misunderstand indicator readings. A trader who has never looked at an indicator’s formula can easily draw the wrong conclusions about its performance.
Forex indicators can use information about candle high, low, candle range size, open, and close. Therefore, the indicator can even show more accurate and convincing data than just the price movement on the chart. Traders often don’t know how to link price data into meaningful conclusions. Thus, it is extremely important for a trader to remain confident in his analysis of the market, otherwise, he may miss out on valuable information and misinterpret the chosen trading instrument.
What Forex indicators can be considered the best
Below are the best Forex indicators used in trading
This indicator belongs to the Stochastic and Moving Averages algorithm. It can be found on almost every MT platform and does not need to be installed and configured first. The only thing you need is to find the provided indicator on the platform. Judging by the look, OSMA is not like other moving averages or Stochastic. It looks more like MACD. Using such a tool makes it possible to see potential market reversals in advance.
Three screens of Elder Indicator
Thanks to the presented indicator, you can receive signals from a number of instruments at once, analyze, and make the right decision. The new versions use specialized alerts that warn that it’s time to open a deal. The main instruments for the indicator Three Screens of Elder are MACD, moving averages, and Stochastic. Thus, the best opportunities for opening positions are opened when the presented algorithms provide appropriate signals. This is one of the new indicators of the Forex market.
Moving average indicator
The algorithm can be classified as the best indicator of the Forex market. It forms the basis of many other well-known tools used in traders’ trading. Note that moving averages can be attributed to a trending algorithm, which indicates in which direction the market will go. Interestingly, the tool is presented in several varieties: simple, weighted, exponential. Each of the varieties only works in a specific market situation.
Bollinger Bands Indicator
It is a combination of several forex indicators from the moving average category. MA in the presented subspecies is shifted by some special period. The principle of operation is quite simple: the cost is constantly between the specified edges, but occasionally breaks through, in order to then return to the specified edges again. When the price breaks out, this is the moment to open orders.
The algorithm is presented in a separate window, regardless of the graph. It translates to the directional movement index. Note that this is not the most trending index, however, it is widely used in the forex market. Many traders often use it as part of their trades. The essence of the indicator is that it shows how strong this or that position is. The tool has several values, its curves constantly fluctuate around them. If you decide to use the instrument in trading, then you should know that it is better to use it with other trend algorithms. It practically does not work autonomously.
This tool cannot belong to the category of new forex indicators, but at the moment it is practically impossible to find traders who have not tried to use it in their work at least once. This algorithm gives several types of signals, like any other oscillator. MACD can showcases when an order can be opened taking into account the current direction when it is possible to use the trend reversal perspectives. The algorithm belongs to the category of modern market Forex indicators.
Parabolic Sar indicator
One of the newer tools that work with acceleration. Within the chart, it is displayed at points above and below the asset value. However, when these points are below the price curve, buy signals appear. If the signals are higher, then the asset should be put up for sale. It is interesting that the indicator can work in conjunction with other instruments.
It is one of the most popular forex trading tools. It does not belong to the rating of indicators of the forex market in 2018, but it is used in most different strategies. The oscillator warns with signals that a trend reversal will follow in sideways trends. Thanks to the Stochastic, it is possible to determine oversold or overbought conditions for any market instrument. In addition, market divergence signals are provided.
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