If you think trading in the Forex market is easy, you are wrong…
It’s not as easy a task as you think. But it may also be a universal truth that a large number of traders are trading successfully and get profitable returns.
Obviously, they can do so because they use different indicators while trading Now the question may pop up in our mind….
Do we really need indicators in forex trading? Yes, we need indicators as they help us in different ways. You must be careful while using indicators. They are worthless if you apply them in the wrong way. Follow the advice of experts and the rules suggested by professionals.
Indicators should not be used alone. Always select two or more indicators as each has different properties.
How indicators will help you or how do you need them?
Let’s explore all these queries in great detail!
Top 10 Indicators with Reasons to Use in Forex Trading
There is a common criticism about indicators in trading is that they simply generalize market data. Therefore, they should not be used as the main trading strategy.
Those who think so means that trading strategy may base on the market actual conditions such as price patterns or others.
Now we discuss the role of indicators in the financial market and explain why you need them in forex trading.
The top 10 indicators with reasons to use are listed below:
1. Moving Averages
It is a type of indicator that is used to find out the current price trend. You can do so without any involvement of short-term price transfix. It gathers the financial price points of an instrument under a specific time period.
It can also divide that financial element to present a single line with the help of data points. So, you can use moving averages as an indicator because they will help you to mark trends.
2. Relative Strength Index
This indicator also moves from 0-100 level. Through it, we can find where the price is going to reverse. When the price level up to 70, it indicates a falling u-turn of the market. It happens in uptrend conditions.
On the other hand, in a downtrend, if the price passes below 30 levels, it shows a positive market reversal.
So, this indicator may prove a need for a forex trader to do the best trading.
Another indicator that depends upon the histogram and rapidly increasing moving average is known as MADC. Calculation of divergence with the price is its main purpose in trading.
Often traders use it as a primary indicator to make trading plans. You can also use it to find possible reversal points of the market. Therefore, it is important to enter your trade according to the plans created with the help of the MADC indicator.
4. Bollinger Bands
As the name shows this indicator is created by Jhon Bollinger. The main purpose of the Bollinger bans is to indicate moving averages.
Basically, there are two standard deviations, one is on the upside and the other is on the downside. A classical moving average stands in the middle.
Bollinger bands are helpful to find out the outside trading asset of usual levels. Mostly, it is used to forecast long-term price movements.
Generally, this type of indicator is very easy to use in trading forex and provides an authentic trading entry.
An indicator that is known as a Stochastic Oscillator is used to balance a certain closing price of a benefit. Such benefits show momentum and strength to a range of over-time prices.
You can use 0-100 scales in this indicator. If you find the reading below 20, it shows an oversold market, and above 80 reading generally represents an overbought market. However, a correction will not necessarily occur, if a strong trend comes.
Each trader needs to find a profit-taking area; therefore, they use this indicator to find the location of the price that is expected to reverse.
6. Ichimoku Cloud
Like many other indicators, Ichimoku Cloud may associate finance and resistance levels. It contains elements that are helpful in the creation of an entire trading strategy.
All these elements make it possible for a trader to understand every feature of the market. Do you know the meaning of Ichimoku?
It means a one-look equilibrium chart. So, that is the reason the traders prefer this indicator to get a lot of information from one chart.
It is a trading tool to identify error-free market directions. Because it has a relation to every element of the universe.
Traders who think about the market that it is going to make a move, use this indicator for confirmation. Like this, Fibonacci helps a trader to decide where to apply limits or stops. It also indicates them when to open and close the position.
Fibonacci levels can be changed according to market behaviour and momentum. So, it may be helpful for a trade to become familiar with the market current positions.
8. Average True Range
If you want to know the volatility of a currency pair, the average true range is the best indicator for this purpose. It has a specific place in trading because measuring the volatility is important in the forex market. It shows direct market movements.
In each trading market, an increase in volatility represents the reversal of the market. On the other hand, the decrease in volatility shows the reopening of the market.
So, with the help of this indicator, you can find trading steps as well as extend take profit.
9. Parabolic SAR
This type of indicator recommends the market direction towards currency pair. If a trader finds the price goes above Parabolic SAR, it means the trend is positive.
On the other hand, if the price goes below, the overall trend is weakening. So, many forex traders use it to recognize the market trend.
It may also be helpful to provide possible entry points.
10. Pivot Point
Such indicators refer to the equilibrium level of the currency pair’s demand and supply. When the price reaches the level of the pivot point, it means the supply and demand of specific pair are equal.
On the other hand, if the price moves above the Pivot Point level, it is a sign of high demand for the currency pair.
However, if you see the price below this indicator, there would be a high supply of currency pairs.
So, having proper knowledge about currencies is an important element.
Can you trade forex without indicators?
Primarily, it is supported to trade without indicators. The reason is that the procedure depends upon the current market conditions instead of historical ones.
Do indicators work in forex?
It is a harsh reality that there is no quick learning from the past of how to trade. Adding indicators will never solve the old problems of making money from forex trading.
To use any indicator to chat, you have to use any mt4 or mt5 chart. Along with other brokers, ICMarkets is providing all the platform and it’s a regulated low spread broker as well.
How many indicators should you use?
Many traders use 1 or 2 indicators of each type for the best results. It proves a nice balance that may not create any confusion or miss out on any information.
In the end, indicators are important in trading to some extent. Here, in this post, we have mentioned all the basic indicators that will be helpful for profitable trading.
The best indicator for forex trading will work best for you and your trading modes. No matter if you are a day trader or a long-term trader, many technical indicators will be according to your trading needs.
We have also discussed the reasons to use indicators because there some theories that forbid to use of indicators.
But you must be careful while adopting them as a wrong decision will cause you disaster.
We shared more than 40 forex indicator, check out our another post, top 30 forex indicator no repaint free download.