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4 Effective Trading Indicators Every Trader Should Know

  • May 11, 2021
    One way to simplify your trading is through a trading plan that
    includes chart indicators and a few rules as to how you should use those
    indicators. In keeping with the idea that simple is best, there are
    four easy indicators you should become familiar with using one or two at
    a time to identify trading entry and exit points:To get more news about
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    There are many fundamental factors when determining the value of a
    currency relative to another currency. Many traders opt to look at the
    charts as a simplified way to identify trading opportunities – using
    forex indicators to do so.




      When looking at the charts, you‘ll notice two common market
    environments. The two environments are either ranging markets with a
    strong level of support and resistance, or floor and ceiling that price
    isn’t breaking through or a trending marketwhere price is steadily
    moving higher or lower.




      Using technical analysis allows you as a trader to identify range
    bound or trending environments and then find higher probability entries
    or exits based on their readings. Reading the indicators is as simple as
    putting them on the chart.One of the best forex indicators for any
    strategy is moving average. Moving averages make it easier for traders
    to locate trading opportunities in the direction of the overall trend.
    When the market is trending up, you can use the moving average or
    multiple moving averages to identify the trend and the right time to buy
    or sell.




      The moving average is a plotted line that simply measures the
    average price of a currency pair over a specific period of time, like
    the last 200 days or year of price action to understand the overall
    direction.Youll notice a trade idea was generated above only with adding
    a few moving averages to the chart. Identifying trade opportunities
    with moving averages allows you see and trade off of momentum by
    entering when the currency pair moves in the direction of the moving
    average, and exiting when it begins to move opposite.




      TRADING WITH RSI




      The Relative Strength Index or RSI is an oscillator that is simple
    and helpful in its application. Oscillators like the RSI help you
    determine when a currency is overbought or oversold, so a reversal is
    likely. For those who like to ‘buy low and sell high’, the RSI may be
    the right indicator for you.The RSI can be used equally well in trending
    or ranging markets to locate better entry and exit prices. When markets
    have no clear direction and are ranging, you can take either buy or
    sell signals like you see above. When markets are trending, it becomes
    more obvious which direction to trade (one benefit of trend trading) and
    you only want to enter in the direction of the trend when the indicator
    is recovering from extremes.




      Because the RSI is an oscillator, it is plotted with values between
    0 and 100. The value of 100 is considered overbought and a reversal to
    the downside is likely whereas the value of 0 is considered oversold and
    a reversal to the upside is commonplace. If an uptrend has been
    discovered, you would want to identify the RSI reversing from readings
    below 30 or oversold before entering back in the direction of the
    trend.Slow stochastics are an oscillator like the RSI that can help you
    locate overbought or oversold environments, likely making a reversal in
    price. The unique aspect of trading with the stochastic indicator is the
    two lines, %K and %D line to signal our entry.




      Because the oscillator has the same overbought or oversold
    readings, you simply look for the %K line to cross above the %D line
    through the 20 level to identify a solid buy signal in the direction of
    the trend.Sometimes known as the king of oscillators, the MACD can be
    used well in trending or ranging markets due to its use of moving
    averages provide a visual display of changes in momentum.




      After youve identified the market environment as either ranging or
    trading, there are two things you want to look for to derive signals
    from this indictor. First, you want to recognize the lines in relation
    to the zero line which identify an upward or downward bias of the
    currency pair. Second, you want to identify a crossover or cross under
    of the MACD line (Red) to the Signal line (Blue) for a buy or sell
    trade, respectively.