Jump to content

Welcome to the new Traders Laboratory! Please bear with us as we finish the migration over the next few days. If you find any issues, want to leave feedback, get in touch with us, or offer suggestions please post to the Support forum here.

  • Welcome Guests

    Welcome. You are currently viewing the forum as a guest which does not give you access to all the great features at Traders Laboratory such as interacting with members, access to all forums, downloading attachments, and eligibility to win free giveaways. Registration is fast, simple and absolutely free. Create a FREE Traders Laboratory account here.

tmbaru

Trading Indicators That Every Trader Should Know About

Recommended Posts

As a newbie in Forex trading you are bound to encounter various challenges as you master the art of trading in this financial market. There is a swarm of various methods that you will encounter and the onus is left to you to choose what works best for you. Discussed below are some of the indicators that you should know about before venturing into this exciting and challenging financial market. Understanding these indicators will give you a head start in Forex trading.

RSI (Relative Strength Index)

 

This is an indicator that is simple and very useful in Forex trading. It is an oscillator that enables you to establish when a currency has been oversold or overbought and thus a reversal is most likely to happen. Relative Strength Index will help to predict rightly such that you will be in a position to buy low and sell high to make your margin.

Relative Strength Analysis helps you in locating better entries and exit prices in the market. When there is no clear direction in the market then you can settle for either buy or sell options. But when there is a clear trend, always enter the market in the favorable direction. RSI has values ranging from 0 to 100, where value of 100 is considered overbought and the value of 0 oversold. Thus, you will be able to analyze the trend before buying or selling the currencies.

The Stochastic

At times it is necessary to analyze environments that are overbought and oversold. Stochastic just like RSI, operate in an oscillator like fashion and helps in identification of reversals in price. There are two lines that characterize the stochastic indicator. These lines which also signal entry are % K and % D. In a bid to identify a buy signal which moves in the same direction like the trend, you just have to look at the % K line to cross over the % D line. This is due to the fact that the oscillator bears the same reading for overbought and oversold environments.

Trading with MACD (Moving Average Convergence and Divergence)

 

The MACD is commonly referred to as the key oscillator. In both trending and ranging markets, the MACD operates well because of its unique use of the moving averages. The changes in momentum are captured well through a visual display of the same. The identification of the market as either trending or ranging should be followed by an examination of two things. First and foremost you need to evaluate whether it is an upward or downward bias. This is made possible by identifying the lines with respect to the zero line. For a buy or sell, you may find it necessary to isolate a cross over or cross under in relation to the MACD line and the signal line.

The MACD just like other indicators cannot work effectively in isolation. They need to be backed up with either a prior identified trend or a market with a definite range. Once these two have been identified, it is imperative that the MACD crossovers are taken towards the existing trend. It is advisable that stops and trade limits are put. These are necessary once you have entered the trade; the stops are normally put below the latest price extremes just before the crossover and the trade limit is usually set at an amount which is double your risk.

Trade indicators therefore are very instrumental to the success of every trader. From momentum to trend indicators, the importance of these trading tools cannot be overemphasized. Success on the Forex market comes with mastering the essentials of trading amongst them the indicators. Just like traffic lights, they tell you when to go and when to stop.

RSI.jpg.f81fff4840c59c3aa4f842659513a44b.jpg

MACD.png.611f162ff8e150f7f98ea3ebe38f1de6.png

Share this post


Link to post
Share on other sites

The Relative Strength Index (RSI) is an oscillator that measures current price strength in relation to previous prices. The RSI is a versatile tool, it can be used to:

Generate buy and sell signals

Show overbought and oversold conditions

Confirm price movement

 

I usually buy when the RSI crosses above the oversold line (30) and sell when the RSI crosses below the overbought line (70).

 

A trader must always use a combination of technical analysis indicators in order to make the right investment decision.

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.


  • Topics

  • Posts

    • Date: 29th March 2024. GBPUSD Analysis: The Pound Trades Higher But For How Long? The global Stocks Markets are closed due to Easter Friday (Good Friday). The NASDAQ continued to follow the sideways trend while other indices again rose. The SNP500 reaches an all-time high, but the NASDAQ remains under pressure from Tesla, Meta and Apple. The Euro continues to trade lower against all major currencies including the US Dollar, Euro and Japanese Yen. The British Pound is the best performing currency during this morning’s Asian session. However, investors are largely fixing their attention on this afternoon’s Core PCE Price Index. GBPUSD – The Pound Trades Higher but For How Long? The GBPUSD is slightly higher than the day’s open and is primary due to the Pound’s strong performance. At the moment, the British Pound is increasing in value against all major currencies. However, the US Dollar Index is also trading 0.10% higher and for this reason there is a slight conflict here. If investors wish to avoid this conflict, the EURUSD is a better option. This is because, the Euro depreciating against the whole currency market avoiding the “tug-of-war” scenario. The GBPUSD is trading slightly lower than the 2-month’s average price and is trading at 49.10 on the RSI. For this reason, the price of the exchange is at a “neutral” level and is signalling neither a buy nor a sell. The day’s price action and future signals are possibly likely to be triggered by this afternoon’s Core PCE Price Index. Analysts expect the Core PCE Price Index to read 0.3% which is slightly lower than the previous month but will result in the annual figure remaining at 2.85%. The PCE rate is different to the inflation rate and the Fed aims for a rate between 1.5% to 2.00%. Therefore, even if the annual rate remains at 2.85%, as analysts expect, it would be too high for the Fed. If the rate increases, even if only slightly, the US Dollar can again renew bullish momentum and the stock market can come under pressure. This includes the SNP500. Investors are focused on the publication of data on the UK’s gross domestic product (GDP) for the last quarter of 2023: the quarterly figures decreased by 0.3%, and 0.2% over the past 12-months. This confirms the state of a shallow recession and the need for stimulation. The data, combined with a cooling labor market and a steady decline in inflation, increase the likelihood that the Bank of England will soon begin interest rate cuts. In the latest meeting the Bank of England representatives did not see any members vote for a hike. USA500 – The SNP500 Rises to New Highs, But Cannot Hold Onto Gains! The price of the SNP500 rises to an all-time high, before correcting 0.33% and ending the day slightly lower than the open price. Nonetheless, the index performs better than the NASDAQ which came under pressure from Tesla, Meta and Apple which hold a higher weight compared to the SNP500. For the SNP500, these 3 stocks hold a weight of 9.25%, whereas the 3 stocks make up 14.63% of the NASDAQ. The SNP500 is also supported by ExxonMobil’s gains due to higher energy prices. The market will remain closed on Friday due to Easter. However, the market will reopen on Monday for the US and investors can expect high volatility. Investors will also need to take into consideration how the PCE Price Index and the changed value of the US Dollar is likely to affect the stock market next week. Always trade with strict risk management. Your capital is the single most important aspect of your trading business. Please note that times displayed based on local time zone and are from time of writing this report. Click HERE to access the full HFM Economic calendar. Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding on how markets work. Click HERE to register for FREE! Click HERE to READ more Market news. Michalis Efthymiou Market Analyst HFMarkets Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.
    • MT4 is good and will be good until their parent company keep updating the software, later mt4 users will have to switch to mt5.
    • $SOUN SoundHound AI stock at 5.91 support area , see https://stockconsultant.com/?SOUN
    • $ELEV Elevation Oncology stock bull flag breakout watch , see https://stockconsultant.com/?ELEV
    • $AVDX AvidXchange stock narrow range breakout watch above 13.32 , see https://stockconsultant.com/?AVDX
×
×
  • Create New...

Important Information

By using this site, you agree to our Terms of Use.