Indicators are nothing but the blessings of the advanced technology. In the past, people used to find the key support and resistance level of a certain asset by doing complex calculations. But just by loading the support and resistance level indicators, you can easily find the key levels of the market. Trading the financial instrument has never been as easier as it is now today. Sadly, new traders don’t really understand the proper use of indicators. They load their trading charts with different kinds of indicators and make things complex. In order to find the best trade setup, you should rely on one or two indicators. Always try to keep your trading charts clear as it will help you to make a better decision. Before you start digging deep, you need to know about the different types of indicators.
- Leading indicator
- Lagging indicators
Leading indicator is often known as oscillators. It always gives early trading signals to the traders. On the contrary, the lagging indicators always give late trading signals. So it should be pretty clear, no indicator is enough to give you perfect trade setup. The expert just uses them to find the reliable of the trade setup. Let’s learn about the three most powerful indicators used in the Forex market.
Stochastic indicators are extremely popular among trend traders. They allow retail traders to understand the over bough and oversold condition of the currency pairs. Generally, the period of the stochastic indicators is set to 5 but in order to achieve precision, you can also tweak the value of the period. If the value of the stochastic indicators stays above 80, it means there is a good chance the price will fall. Similarly, if the value goes below 20, you can look for bullish reversal signals in the currency pairs. But always remember to use other variables before executing the trade in your online trading platform. Indicators should be used as your trade filter tools only.
The market is always moving to make different highs and lows. The long-term traders cautiously wait to spot the higher highs or lower highs of the market. But at times it becomes extremely complicated and the expert uses the zigzag indicators. These indicators draw the simple wave based on the key swings of the market. By using the Fibonacci retracement tools and zigzag indicators you can easily find high-quality trades. But always remember, this indicator is not 100% accurate. At times it generates false signals. So how do you avoid these false signals? The simple answer is the higher time frame. In lower time frame you are most likely to face tons of false spike. So, try to trade the daily time frame to increase your winning edge.
A moving average is by far the best indicators in the Forex market. There are four types moving averages in the forex market. But the professional Singaporean traders prefer to use the simple moving average as it allows the traders to find the dynamic support and resistance level. If you prefer a long-term trading strategy, it’s better to use the 100 and 200 days SMA. You can also spot the major trend reversal in the market by using the crossover strategy. If the 100 moving average crosses above the 200 SMA, consider it as a bullish reversal sign. Similarly, if it crosses below the 200 SMA, you should look for selling opportunity.
Those who know the proper use of indicators can easily make a decent profit from this market. However, you can also trade the market without using the indicators. Learn price action trading and you will be able to spot high-quality trade setups at the key support and resistance level. Always remember, you should never invest any money which you can’t afford to lose. Trade with proper money management to protect your trading capital from unexpected market movement.