A Combination of Indicators For Bigger Profits
The group of indicators outlined here are the best Forex trading indicators in my view and any trader, novice or pro, should know about them. They are all simple to learn visual indicators which are very effective. No indicator is perfect, but if you learn how to combine the best and practice you can build a robust Forex trading strategy for success. Here are your best Forex trading indicators and how you can use them for bigger Forex profits.
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The Bollinger Band
Developed by John Bollinger, this indicator has the use of showing the volatility of a currency from the norm. You can soon spot overbought and oversold levels as volatility rises and trade into them. The middle band is a simple moving average and you can buy and sell back to it in strongly trending markets as this area indicates value. This simple strategy is one any trader should know. The Bollinger band maybe one of the best Forex trading indicators, but you must confirm moves and for this you need some momentum indicators to time your trading signals. Let's look at some.
Relative Strength Index RSI
Developed by trading legend Wells Wilder, this is a great indicator you can use to gauge the strength of a trend. If the RSI is in favor of the trend you stay with it, when it diverges from the trend, then it's time to either bank profits or enter contrary trades.
Average Directional Movement ADX
Another indicator from Wells Wilder and like the RSI, the ADX attempts to determine if the market is in a trend or not. The ADX line is a great momentum indicator and will help you trade and stay with the strongest trends. It also acts as a great indicator in terms of warning when a strong trend may change. A great profit taking signal is when the ADX rises above 40 and turns. When this happens you can bank profits or look for contrary trades.
The Stochastic
Developed by George Lane, this is probably the best indicator to help you get better market timing and execute trading signals. Stochastic crossovers can confirm any move within a trend and can also be used to take contrary trades. In contrary trades, a stochastic cross with bullish or bearish divergence (from overbought or oversold levels) against the prevailing trend is very effective.
Moving Averages
Price spikes don't last for long and prices will return to a longer term average. In existing trends this tends to be around the 20 day average and in longer term trends, you can trail a stop back behind the 40 day moving average. This is a simple tool and every trader should use them for setting up entry and exit points.
They Work and Will Continue to Work
The above are the only indicators I use and I have been using them for 25 years. They're still as effective today as they ever were. These best Forex trading indicators, if used correctly, can improve profits and decrease risk and that's what all Forex traders need in their trading.
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