4 Most Popular Forex Indicators That Every Trader Should Learn and Be Aware Of

Mar 24, 2018 by

Photo by Ian Valerio on Unsplash

Day traders use a number of tools to track trends in the market. Some use proprietary software offered by stock trading companies to watch their investments. For most people who like a hands-on approach, forex indicators are a must-have. There are very many indicators in the forex market. A few of them, however, stand out as they are used by the vast majority of traders. These indicators are not only functional but they are also reliable in the long term for analyzing a volatile market (also known as “volatilis jelentése” in Hungary). If you want to get the best out of the forex business, here are the 4 most popular forex indicators that you should learn and be aware of.

1. The Stochastic Indicator

The stochastic is a complete indicator that analyzes the price range over a period of time. This range comes into perspective when it is considered alongside the closing price of an item in the market. In general, the two signals on this indicator are responsible for alerting traders when to buy or sell. The moving average line, for instance, signals an oversold commodity when it hits its lowest point. At this time, it is good to buy as the only direction the prices can move is up. The reverse scenario is true for indicating when to sell.

2. Moving Average (MA) Indicator

The moving average is a technical indicator that gives the best technical analysis. This indicator shows the average price of a commodity during a specified period. In the forex market scenario, this indicator shows the price of currencies over an average period of a few days. The overall trend observed after a specified period can then be used to derive conclusions. In general, the moving is a simple indicator that can give traders the most basic overview of the market. When used alongside other indicators, the MA can provide an excellent backup for comparisons.

Photo by Dietmar Becker on Unsplash

3. Moving Average Convergence Divergence (MACD) Indicator

The MACD generally works just like the MA. The difference, however, is that this indicator compares the long-term trends to the short-term trends. The chart for this indicator has two lines that work together to give market insights. The MACD line is usually underpinned by a short-term signal line. By observing the relationship between the short-term trend provided by the signal line to the MACD, traders are able to identify exact bearish positions. This indicator is one of the more sophisticated ones in forex trading. Its usefulness is nevertheless the best aspect of the indicator.

4. The Relative Strength Index (RSI)

Finally, the RSI indicator is quite significant and every trader should definitely take an interest in it. The indicator is popular because it is one of the technical indicators that show trends of overbuying and overselling in the market. This is key to directly indicate the gains and losses made in the trade. The RSI can help a trader avoid pitfalls in the market. It shows the momentum of price over a set period of time and shows the most bearish assets at the end of the period.

There are definitely other indicators that are useful as well, but the top 4 indicators in terms of popularity are those included in this list.

Print Friendly, PDF & Email

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.