Trading on the Forex market can be easy and hard, depending on how good you are. If you are just getting started and are unaware of the intricacies of the trading world, or if you are trading blindly, then it’ll likely incline toward the hard part.
But if you have been trading for a while, or have taken time to learn and understand the Forex indicators, then you will likely have an easy time trading.
So, which side do you want to be on?
We bet the latter. Otherwise, you won’t be reading this.
So, to help point you in the right direction, we’ll highlight the top five Forex trend indicators that you should know.
But before we do that, let’s have a brief look at what Forex indicators are.
What are Forex Indicators?
Forex analysis indicators are computer scripts that can help you better understand and act on price movement.
These chart analysis tools are often utilized to predict price changes in the currency market.
A majority of FX traders spend their time looking for the best opportunity to enter the market or a sure sign that shouts “sell” or “buy.” And although the search can be exciting, the result is always similar.
The reality is, there isn’t a way of trading the forex markets.
That’s why traders need to learn that different indicators can help establish the perfect time to sell or buy a forex cross rate.
Here are three various market indicators that top traders depend on.
Trend following indicators
These indicators help traders to uncover the overall direction of a currency pair. Trends can either be downwards or upwards. Trend indicators shift values according to the strength of the basic trend and include moving averages (both exponential and simple), Parabolic SAR, Moving Average Convergence Divergence (MACD) and Average Directional Movement Index (ADX) among others.
The best Forex trend indicator relies on your trading strategy and style, so it might be a good idea to try these options out first.
Volatility indicators measure the relative price shift rate of a market. If the price quickly moves down or up within a short period, the market is termed as volatile.
But if it moves slowly, the market is considered non-volatile. Average True Range (ATR) and Bollinger Bands are examples of volatility indicators.
These are FX market indicators that track the speed of a price move during a specified period. They are critical indicators for breakout traders who are keen on catching the initial price change with high momentum after a breakout of crucial technical levels.
Examples include Stochastics, Relative Strength Index (RSI), Commodity Channel Index (CCI), etc.
Conclusion on Forex indicators
You probably are wondering about which indicator to use. According to expert traders, the best indicator is one that works best for you. It is all up to your preference, whether you combine the indicators or choose to use each one independently.
But while you are at it, keep in mind that overly complicating your approach with very many indicators can force you to process too much data, leading to paralysis by analysis.
So, try to keep it simple.