On the stock market, it is no secret that the most successful traders in South Africa do not rely on their simple intuition but instead work on a fine and precise technical analysis. For this, they choose the best technical indicators. To become a successful trader yourself, here are the 6 most effective indicators.
The Best Forex Trading Indicator
When we are new to Forex, we often start looking for the best trading indicator, the one that will make us earn money quickly.
Unfortunately, such a universal technical indicator does not exist. Or rather, there is no one best indicator to trade all markets, all trading styles, and under any strategy.
No, but there are indicators that are better than others in certain markets, for certain styles of trading or for certain strategies.
It is up to each trader, therefore, to find the best trading indicator for him, adapted to his investor profile. To help you, here is our ranking:
Simple Moving Average (MMS) Trading Indicator
The Simple Moving Average (MMS) indicator, or SMA in English, is a trend indicator. It may not be the best indicator in Forex trading, but it is one of the simplest.
The MMS trading indicator plots a curve on your chart that follows the price trend over a specified period. A short period will be more responsive to changes in direction than a longer period.
An overlap of trends over these two periods indicates an opportunity to buy or sell depending on whether the trend is bullish or bearish.
Exponential Moving Average (EMA) Trading Indicator
Another trend indicator from the same family is the Exponential Moving Average (EMA) indicator. It is considered to be one of the best indicators, if not the best indicator for trading.
The MME indicator (or EMA, from English Exponential Moving Average) draws a smooth curve (method of smoothing values which eliminates transient fluctuations) and therefore easier to read on a graph.
MACD Trading Indicator
A third essential trading technical indicator is the very popular MACD (standing for Moving Average Convergence Divergence).
The MACD trading indicator calculates the difference between two exponential moving averages and represents the positive and negative values on your chart.
With the MACD Trading Indicator, you can predict the intensity with which prices are likely to rise or fall.
The Fibonacci Retracement
In Forex, a trading indicator that has few skeptics is based on the Fibonacci retracement. It is one of the most trusted tools of Forex traders.
Fibonacci retracements and extensions can predict market support and resistance lines. They are represented on a Japanese candlestick chart.
The main retracement values to know are 38.2%, 50% and 61.8%. These are the most anticipated retracements in trading, especially in a trend market.
The main extension values to know are 127.2% and 161.8%. These are the two extensions most used by Fibonacci traders.
Fractals
Another popular forex trading indicator, fractals help traders identify the underlying fluctuations in price waves.
Graphically, fractals consist of five consecutive bars on a histogram.
We are looking for a fractal break, which will lead to the crossing of a pivot point (support or resistance) and allow a position to be taken.
Bollinger Bands
The latest stock market trading indicator among the best, the Bollinger bands, named after its creator John Bollinger, allow you to spot the first signs of a trend.
These Bollinger bands are three in number:
- The upper band,
- The middle band,
- The lower band.
The distance between the upper and lower bands indicates volatility. Thanks to an upper terminal and a lower terminal, this indicator offers a good reading of the market. It is a true indicator pro trader.
Best Forex Trading Indicator – Conclusion
At the end of this article, if you are still wondering which online trading indicator to choose, it is best to test the six tools presented here on a demo account. Such an account will allow you to familiarize yourself with each of them and to determine without taking any risks the best trading indicator for you.
Image Courtesy: Forex Trading SA