People who trade in the foreign exchange market understand the numerous risks associated with such a volatile market. It’s rarely easy to identify the best time to buy or sell a financial commodity in order to make profits. However, seasoned traders rely on multiple tools that can help them make better decisions. If you are an aspiring forex trader yourself, it’s time you learned about forex indicators that can predict the market changes. Below, you will find some of the most important forex indicators that every trader should know.
As the name implies, using a trend-following indicator means basing your trading decisions as per the market direction. One of the simplest ways to determine the market direction is by using the moving average crossover. This is a figure that shows the average closing price of a certain financial commodity over a specific period. Once you identify this figure, you will be able to decide whether to trade long or short. Trading long means that you’re predicting an asset to rise in value. In contrast, trading short is when you get rid of assets you’re holding because you’re expecting their price to fall. Trend-following is a good technical-analysis indicator for beginners because it’s easy to use and doesn’t require a lot of work.
If you’re looking for an efficient way to make your trading decisions, a chart pattern dashboard is an amazing indicator for this task. This indicator shows the changing patterns of financial commodities in real-time. As per professional forex technical analysts at Forexprofitway.com, chart pattern dashboards save you the hassle of manually scanning every pattern and time-frame. At a glance, you’ll be able to identify the ever-changing price breakout patterns.
Harmonic trading indicators are multi-timeframe indicators that you can use to detect price breakout patterns from one minute up to one month. Harmonic patterns like the crab and bat use the assumption that trade patterns repeat themselves and so can be predicted using geometric shapes and numbers. Using the primary ratio, which is found in nature, traders can apply the same concept on financial markets to make more precise market predictions. However, it’s important to note that harmonic patterns can be misleading as non-harmonic patterns can exist at the same time affecting the market entry and exit decisions.
A trend confirmation tool is often used with the trend-following indicator in order to measure the accuracy of its results. While trend-confirmation indicators might not be enough for a trader to decide whether to buy or sell a financial commodity, they can be used as a complementary tool alongside more efficient indicators.
This indicator helps you decide whether to trade once a trend is confirmed or wait till after a pullback happens. Pullbacks almost always occur after an uptrend and are considered the turning point beyond which the market stabilizes. Using this indicator you can easily identify the overbought phase (where the asset is valued above its real price) and oversold phase (where the asset is valued below its real price) of any financial asset. According to your trading preferences, you can choose one of the two approaches.
There is no single way for traders to identify the best time to buy or sell their currency of interest. However, the indicators discussed above can be of great help and can immensely decrease the level of risk associated with foreign trading. Make sure you have a good understanding of how to best employ each of the tools before you start trading. As you’ll get to learn, mastering one indicator won’t be enough, you will need to use a combination of different ones for the best results.