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Trading in the forex market tends to be a little confusing when you're first starting, which is why it's vital to your success as a trader to understand technical indicators and use them within the framework of your forex trading strategy. Forex indicators assist traders in predicting the direction in which the currency market will travel. Following the indicators will give any forex trader the information they need to work their forex trading strategy.

 

 

You see technical analysis is just the study of the short term price action in the market. Now, this short term price action is determined by the buyers and sellers in the market. Markets are just buyers and sellers trying to buy or sell. Their emotions rule the markets. When these buyers and sellers all start behaving in the same manner, you can well imagine market can become highly predictable. When things become predictable, they lose their value. This is the exact reason why when majority of the traders use the same indicators they become useless.

 

The different types of Forex trading indicators depend upon the need of an individual. For just a technical support, a trader needs to set up the whole scenario of deriving the very least of information from the indicators. This can be a set up of two or more kinds of indicators which are combined in order to obtain very helpful results.

 

In a layman language, indicators are something which alarms you to trade. It sets up informative surrounding and makes work much easier. It is supported by trend, cycle, volume and momentum in trading. The indicator uses trend to show the ongoing setup of the market. It makes the trader aware of the uprising or downfall in the market which can be used as a piece of information.

 

The Bollinger Bands

They give very good signals and can be used as support\resistance indicators, telling us - before the move occurs - that a reversal is prone to happen. When price touches the lower band it is oversold, and when price touches the upper band it is overbought.

 

The trading method for the Bollinger Bands is basically to look for price-action support and resistance levels, and confirm them with bounces on the Bollinger Bands themselves. This results in very high win rate and consistent profits.

 

The Simple Moving Average, or the SMA, is an interesting indicator that most traders do not use in the right way. Most traders use it as a trend-following indicator to enter trades after a trend has been established, however we use it in an entirely different way.

For example:

 

The last five closing prices for MSFT are:

 

28.93+28.48+28.44+28.91+28.48 = 143.24

 

To calculate the simple moving average formula you divide the total of the closing prices and divide it by the number of periods.

 

5-day SMA = 143.24/5 = 28.65

 

 

The most accurate and predictive way to use the SMA is in the bounce method: we wait for trend to establish, but instead of randomly entering, we wait for price to retrace to the moving average and bounce off it.

 

Relative Strength Index

The RSI is the abbreviation of the Relative Strength Index, which is introduced by Mr. Welles Wilder in 1978. The RSI method is one of the Oscillator analysis, which indicates the gapping in the forex market using figures, 0 to 100.

 

RSI = 100 - ( 100 / ( 1 + RS ) )

RS = Average of inclining prices for X days / average of declining prices for X days

 

Now you have to choose which one is best for your trading

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Trading in the forex market tends to be a little confusing when you're first starting, which is why it's vital to your success as a trader to understand technical indicators and use them within the framework of your forex trading strategy. Forex indicators assist traders in predicting the direction in which the currency market will travel. Following the indicators will give any forex trader the information they need to work their forex trading strategy.

 

 

You see technical analysis is just the study of the short term price action in the market. Now, this short term price action is determined by the buyers and sellers in the market. Markets are just buyers and sellers trying to buy or sell. Their emotions rule the markets. When these buyers and sellers all start behaving in the same manner, you can well imagine market can become highly predictable. When things become predictable, they lose their value. This is the exact reason why when majority of the traders use the same indicators they become useless.

 

The different types of Forex trading indicators depend upon the need of an individual. For just a technical support, a trader needs to set up the whole scenario of deriving the very least of information from the indicators. This can be a set up of two or more kinds of indicators which are combined in order to obtain very helpful results.

 

In a layman language, indicators are something which alarms you to trade. It sets up informative surrounding and makes work much easier. It is supported by trend, cycle, volume and momentum in trading. The indicator uses trend to show the ongoing setup of the market. It makes the trader aware of the uprising or downfall in the market which can be used as a piece of information.

 

The Bollinger Bands

They give very good signals and can be used as support\resistance indicators, telling us - before the move occurs - that a reversal is prone to happen. When price touches the lower band it is oversold, and when price touches the upper band it is overbought.

 

The trading method for the Bollinger Bands is basically to look for price-action support and resistance levels, and confirm them with bounces on the Bollinger Bands themselves. This results in very high win rate and consistent profits.

 

The Simple Moving Average, or the SMA, is an interesting indicator that most traders do not use in the right way. Most traders use it as a trend-following indicator to enter trades after a trend has been established, however we use it in an entirely different way.

For example:

 

The last five closing prices for MSFT are:

 

28.93+28.48+28.44+28.91+28.48 = 143.24

 

To calculate the simple moving average formula you divide the total of the closing prices and divide it by the number of periods.

 

5-day SMA = 143.24/5 = 28.65

 

 

The most accurate and predictive way to use the SMA is in the bounce method: we wait for trend to establish, but instead of randomly entering, we wait for price to retrace to the moving average and bounce off it.

 

Relative Strength Index

The RSI is the abbreviation of the Relative Strength Index, which is introduced by Mr. Welles Wilder in 1978. The RSI method is one of the Oscillator analysis, which indicates the gapping in the forex market using figures, 0 to 100.

 

RSI = 100 - ( 100 / ( 1 + RS ) )

RS = Average of inclining prices for X days / average of declining prices for X days

 

Now you have to choose which one is best for your trading

 

Hi AndySteven,

 

Personally don't use any indicators but if i did then i would apply the methods and indicator use/settings from Constance Brown's book "Technical Analysis for the Trading Professional". A must to have an edge if you trade with indicators.

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