Essential Indicators For Bigger Forex Profits
If you want to use forex technical analysis, then you will need to look at forex charts to decide where to execute your trading signals. You will of course need to combine indicators to do this – Here we will give you some essential ones, to help you achieve currency trading success.
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Before we look at how to use forex charts correctly, lets make two things clear.
1. Day trading
Do not even try and attempt it. The time frame is to short and all volatility is random, so you have no valid data and will lose. Day trading profits is one of the biggest myths of forex trading – Don’t fall for it.
2. You can’t predict market turns in advance
Forget the far out investment theories like Elliot wave, Fibonacci numbers, cycles etc that are supposed to repeat with scientific accuracy – they don’t. If they did everyone would know the price in advance – so there would be no market.
Lets move on and look at forex charts and how to get trading signals for longer term profits.
Determining the trend
You have a choice trend lines or moving averages. The former are better, as you have more precise levels but there is no harm in using moving averages as back up. Your main aim is to determine support and resistance levels and decide if they are going to break or hold.
Determining Price Momentum
You need to ALWAYS trade in the direction of price momentum. An accelerating price momentum through resistance for example would favour the bulls; if price momentum drops it favours the bears. There are two essential indicators you can use and if you don’t know what they are learn them – the stochastic and Relative Strength Index ( RSI) - these are simply great indicators for helping you enter trades and take profits.
Determining Volatility
You need to know about volatility from the point of view of warning of price reversals and determining targets and there is no better tool than the Bollinger band. This indicator should NOT be used to generate trading signals but as a warning of trend change coming, or in determining targets there is no better tool. Using trend lines to determine areas of support and resistance combined with momentum indicators to time entry and exit levels is all you need. These are objective tools that tell you what to do – Ignore any technical tool that means you have to make subjective judgements i.e Elliot wave or cycles - they will simply see you lose.
The indicators above are essential tools and if you learn about them and combine them, you will have a simple robust method to trend follow or swing trade and ALWAYS trade with the odds in your favour. If you remember the above in relation to your forex charts, you can achieve longer term currency trading success.
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