Trading currencies using indicators is one of the most common practices which traders indulge in. It is also one mode which many rely on heavily. But when one gander at the truth, it is found that there is no cut-through strategy which one can label as pure Forex Winners. Getting your indicator permutation and combination right when formulating a strategy is of utmost importance! Though many try and some try harder, it all boils down to trading convenience on a personal level.
So, on that note, here are some suggestions on indications which you can use to develop your very own winning method.
Most popular indicators for your Forex Winners:
1. Relative Strength Index (RSI):
Relative Strength Index gives out hints on Overbought and Oversold situations. Plus it also tells you about possible divergences. It consists of one line which goes towards an upper area and a lower region denoting the above market situation.
When the line moves across the 70 mark, you get your OverBought signal, and when it goes below 30 range, it gives away OverSold signals.
In case of divergence, it is pretty much similar to Stochastic mainly Tops and Bottoms. When upward movements happen, it shows a possible Bullish divergence and vice-versa indicates Bearish divergence. This labels as a leading indicator and is one common tool which many traders new and old make use of.
On working with an H4 chart with the pair GBP/USD with RSI, you come across a couple of signals consecutively. When the first signal happens- namely in the OverSold region, the currency price starts off strong and continues its steady increase for a period of a couple of weeks.
Then after the first signal, the currency price starts another strong trend and lasts for a period of a couple of weeks. This is where you get the OverBought condition for GBP/USD. You will then find the price breaking through the OverBought region and falling.
2. Average Directional Index (ADX):
This Indicator is great for trend analysis and labels as one of the most reliable lagging indicators around. It consists of a curvy line that moves between 0-60. If you are trading with GBP/USD and the ADX values lie around 35-40, then it means that the trend signal is very strong.
On the contrary, if the ADX value is present between 20 and 30, then it denotes that a new trend is still developing. However, a word of caution as fake-outs at these low regions is a distinct possibility. As a word of advice, it is best to stay out of situations when the ADX value is under 20. This is another Forex Winner free download option for you to use.
3. Moving Average Convergence Divergence (MACD):
For your Forex Winners, another cool option to make use of is MACD. 2 rudiments of using this indicator are as follows
a) When the MACD line moves upwards, that is a sign that you should go for Long Trades and when the line moves down, then simply go for Short Trades.
b) When MACD line is going up, but price is falling, then that denotes Bearish Divergence and vice-versa implies Bullish Divergence.
Get proper knowledge about using these reliable indicators and also demo trade with them for adequate familiarity. If you use it well, it will act as your Forex Winners. But perfection will come with tons of practice. So without expecting some slack, get at it right away.
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.