Do you know what the Forex market is? What about Forex indicators? If not, you’re in the right place to learn more.
The foreign exchange market, known as Forex, is a global market for the trading of currencies. On average, over $5 trillion U.S. dollars are traded each day in the Forex market. This makes the Forex 27 times larger than the stock market.
Those who want to make money trading on the Forex market rely on a variety of technical indicators to guide them in their trades.
But do you know which Forex indicators are best to use?
We’re here to tell you what the most important Forex indicators are for 2018.
Top Forex Indicators for 2018
There are many Forex technical indicators you could use. Here are the ones you should pay attention to.
1. Simple Moving Average
The simple moving average (SMA) indicator tells you the average price for a given period. Using this indicator will allow you to better see trends in Forex trading.
It is important to note the SMA is a lagging indicator which looks at prices in the past. This means it’s an ideal indicator to confirm market trends and not to find trends.
Typically, the SMA will look at both short-term and long-term average prices. An uptrend is signaled when the long-term price average moves above the short-term average.
2. MACD Indicator
The Moving Average Convergence/Divergence indicator (MACD) measures Forex momentum to show trends.
Using this indicator will allow you to see the relationship between two different time periods. The most common MACD indicator looks at the 26-day exponential moving average (EMA) and the 12-day one.
The MACD subtracts the 26 EMA from the 12-day one and plots the result as a signal line.
When the MACD line moves below the signal line it’s a sell signal. If the MACD moves above the signal line, it’s a buy signal.
3. Bollinger Band
Bollinger bands are a way to measure volatility in the Forex market. They are useful for identifying the start of a new trend.
The Bollinger band looks at price deviation from the simple moving average. Generally, the bands cover 2 to 5 standard deviations above and below the SMA.
If market volatility is low, the bands will be close together. When volatility increases, the bands will widen.
4. Average Directional Index
The Average Directional Index, or ADX, is a gauge of how strong a trend is.
It will not show the direction of the trend but will tell you when the price is trending strongly. This will allow you to see when a trend is weakening indicating you should think about exiting the trade.
This is one of the most widely used Forex technical indicators.
5. Relative Strength Index
The Relative Strength Index, or RSI, is a way to identify overbought and oversold signals.
It compares the magnitude of recent gains and losses over a given period to find the speed of price movements.
A high RSI is an indication of a market being overbought and at risk of a price reversal. Likewise, a low RSI value suggests prices might move higher.
Using Forex Indicators That Work
These Forex indicators can help you successfully trade the Forex market.
If you’re going to trade on the Forex market, you’ll want to check out our courses so you can learn tips and strategies to help you succeed.
Whether you’re a beginner looking for simple tips and tricks to Forex trading or a seasoned pro, we’re here to help.
Be sure to check our website often for in-depth analysis and news about the Forex market.