Forex trading is a competitive industry, and most traders start off with a variety of forex trading methods. However, charts indicators such as the Moving Average, RSI, Stochastic, and MACD are all capable of helping traders identify forex opportunities. Using these indicators will ensure that you properly execute your forex trading strategy. You’ll also receive a complimentary forex indicator reinforcement tool to help you identify forex opportunities every day.
THE BENEFITS OF A SIMPLE STRATEGY
Forex beginners often make the mistake of overcomplicating things. This is unfortunate, but it is a fact. The forex market is complex, and this causes forex beginners to feel that a complex trading strategy with many moving parts must be superior. Because a simple strategy allows for quick reactions and less stress, a simple forex trading strategy is usually the best choice.
When you start out, aim for the simplest and most effective methods of identifying trades and stick to them.
DISCOVER THE BEST FOREX INDICATORS FOR A SIMPLE STRATEGY
Using a charting strategy that includes chart indicators and a few rules as to how you should use them will allow you to simplify your trading. When you think of maintaining simplicity as opposed to complexity, here are four indicators you should learn to use one or two at a time to identify trading entry and exit points:
1. Moving Average
2. RSI (Relative Strength Index)
3. Slow Stochastic
4. MACD
A simple trading plan with simple rules is your best ally once you are trading a live account.
USING FOREX INDICATORS TO READ CHARTS FOR DIFFERENT MARKET ENVIRONMENTS
Forex indicators can be used to identify forex trading opportunities on the charts simply by looking at the two common market environments.
There are two market environments that you might see on the charts, ranging markets with a strong level of support and resistance or floors and ceilings that price isn’t breaking through or trending markets where price is increasing or decreasing steadily. All you have to do is put the indicators on the chart in order to read them.
You can identify range or trending markets using technical analysis as you can see on the charts. Using technical analysis, you’ll be able to find higher probability entries or exits for your investments since the indicators will signal when range or trending markets are present.
TRADING WITH MOVING AVERAGES
Forex traders can utilise moving averages to identify trading opportunities in the direction of the market’s overall trend. Moving averages provide forex traders with an easy way to locate trading opportunities in the direction of the market’s trend. When the market is trending up, you can identify the trend and time to buy or sell using a moving average.
A moving average is a line plotted over a certain amount of time to measure the average cost of a forex pair.
LEARN FOREX: GBPUSD DAILY CHART - MOVING AVERAGE
The chart above has a trade idea generated only with the addition of a few moving averages to the chart. Momentum can be seen and traded off by entering when the currency pair moves in the direction of the moving average, and exiting when it begins to move in the opposite direction.
TRADING WITH RSI
The Relative Strength Index, also known as the RSI, is a simple and helpful oscillator. When a currency is overbought or oversold, a reversal is likely. Those who ‘buy low and sell high’ might appreciate the RSI as a indicator.
You can use the RSI equally well to locate better entry and exit prices in trending or ranging markets. Even if there is no clear direction and the markets are ranging, you may take the signals shown above. When the markets are trending, it becomes more obvious which direction to trade (one advantage of trend trading) and you should only enter when the indicator has recuperated from extremes.
The RSI is plotted between 0 and 100. 100 is considered overbought and a reversal to the downside is likely, while 0 is considered oversold and a reversal to the upside is common. When identifying an uptrend, the RSI should reverse from readings below 30 or oversold if you are entering back in the direction of the trend.
TRADING WITH STOCHASTICS
The RSI can help you identify overbought or oversold situations, which may result in a reversal in price.
The stochastic indicator has two lines, the %K and %D, that serve as entry points. When the %K line crosses above the %D line through the 20 mark, it indicates a strong buy or sell signal in the direction of the trend.
TRADING WITH THE MOVING AVERAGE CONVERGENCE & DIVERGENCE (MACD)
The MACD, also known as the king of oscillators, is an excellent tool for gauging changes in momentum, whether trending or ranging markets. In addition to providing a visual display of changes in momentum, moving averages are used to create the MACD. A crossover or cross under of the MACD line (Red) to the Signal line (Blue) for a buy or sell trade signals an upward or downward bias in the currency pair, respectively.
It is best to follow crossovers of the MACD line with identified trends or range-bound markets when employing the MACD. Once you’ve identified the trend, you should take MACD crossovers in the direction of the trend. As soon as you enter the trade, you can set stops below the recent price extreme before the crossover, and set a trade limit at twice your investment.
