The forex market is massive, with trillions of dollars being exchanged each and every day, making it the most liquid of financial markets.
For this reason, traders will pour money into positions they believe will be profitable. In fact, almost 90 percent of trading on the forex market is considered speculative. Even though most of these traders are taking a chance, they use certain tools and resources to help them predict the most plausible outcome called forex indicators.
Keep reading to learn the best forex indicators to get you started trading and generating income.
1. Finding Trends
When it comes to trading the forex market, trends are an important factor that should be considered. Several traders will take advantage of emerging trends with a technique called scalping, where you make a significant amount of traders in a short amount of time intending to capitalize on small price movements.
One of the easiest indicators to use is the Simple Moving Average (SMA) to find trends. The SMA works by calculating the average price over a certain amount of time. Using the SMA, you can spot trends in price action, but be sure to confirm with other indicators, as SMA's can provide false signals.
A good indicator that many traders use to confirm trends is the Moving Average Convergence Divergence (MACD). The indicator works by subtracting the difference between 2 moving averages to compare the relationship and give insights into new trends taking place.
3. Finding Price Levels
Trends are critical when trading the forex market. However, if you don't know how to find price levels, you may still be losing out on profit. Discovering levels of support and resistance, or pivot points, are critical when navigating the forex market. These are the levels at which investors are willing to buy or sell.
Using the Relative Strength Indicator (RSI) can help traders determine when a currency pair is either overbought or oversold. The RSI indicator features an oscillator ranging from 0 to 100, anything under 30 is typically considered oversold, and anything over 70 is considered overbought.
Another helpful tool investors will use is Bollinger Bands, which consists of three different lines: upper, middle, and lower. The purpose is to show a visual representation of volatility and standard deviations to price action.
3. Advanced Trading Indicators
These are some of the basic forex indicators that will help you start analyzing trade ideas and finding the best prices. For advanced trading techniques and indicators, check out the experts at Frugal Forex and get started trading today.
Trading platforms can give you an edge with many different useful functions to help improve your trading. Having software assistance while trading can help with positioning, risk management, support/ resistance levels, among other functions.
Looking to Learn More About Forex Indicators?
Learning to utilize and understand the different forex indicators can make a significant difference in how successful you are as a trader. Different traders will use different tools and resources to give them the edge to make an FX profit - you will have to determine which one works best for you and your trading style.
For more information about forex indicators and other investment advice, check out the rest of our blog! Visit the Investing section of the Bootstrap Business Blog to learn more about forex trading tips.
