Forex Prediction Indicator Needed? A forex prediction indicator helps to forecasting the trends for different currency pairs for a given timeframe. The prediction indicator analyses as well as predicts the trends for different frame of times and further displays the result in a separate window underneath the main forex chart. The indicator basically draws a sell or buy arrow on the basis of the results achieved. These indicators display the outcome on the chart in real-time.
While, a buy forex signal is formed when the number of buyers is more than the sellers, a selling signal is formed when the number of sellers is higher. Irrespective of what the chart show, the prediction indicator is ideal for short-term forex trading. In fact, it is also an excellent choice for intra-day forex trading and scalping. Continue reading to discover more about the best prediction indicator. Here you can find some of the Best MT4 Indicators.
One of the most sought-after forex prediction indicators in MT4 platform used alike by all the traders is the moving averages. Also known as MAs, Moving Averages are regarded as a highly popular technical indicator and used by all kinds of traders, irrespective of their trading style, psychology and approach. Moving Average is basically an indicator that follows trend and help you to identify trend without getting distracted by high volatility as well as fluctuations in price. In fact, most of the other technical indicators are designed in accordance with moving averages. MAs are also one among the oldest prediction indicators that is extensively used for analysing the market direction and is one of the best forex prediction indicator of market trends.
The main function of the MA is to average the stock price over a determined period. As the price fluctuates, its MA goes up or down as well. It is particularly important to watch the MA angle – if the indicator goes horizontally, then there is a sideways trend, and if there is a visible angle, then the price is trending. MAs with lower periods (fast MAs) are more volatile, while the ones with higher periods (slow MAs) tend to be smoother.
Also, the best forex trading signal is generated from two MAs i.e. fast MA as well as slow MA. Thus, when the fast Moving Average crosses the slower one from below to top, then the traders must buy whereas they must sell in the vice versa situation. In essence, Moving Average doesn’t simply identify the trend’s direction, but also helps to spot trend reversals, as well as shows the support & resistance levels
Apart from the simple moving averages, there are Exponential Moving Averages or EMAs that pay more heed to the latest price movements as opposed to the previous or the older ones, thus making it much more volatile.
Another most prominent forex prediction indicator is the Bollinger Bands. They are used for measuring the market volatility. As far as the Bollinger Bands are concerned, they comprise of three lines. Every line or band denotes a Moving Average. The middle Bollinger Band is typically a 20-period Simple Moving Average. It helps to identify the direction of the trend. On the other hand, the lower and upper bands (also referred to as the volatility bands) shift in 2 standard deviations below and above the middle Bollinger band.
Put simply, the Bollinger Bands forex indicator place the price of currency in a type of box in between the 2 outside lines. The currency price constantly revolves around the line in the middle. It can test the levels that go beyond the lines outside, however, it happens for a short time period only and does not go far away. After any such deviation, the price has to return. As a trader, you will notice that at some time periods, the Bollinger bands come close together whereas on other periods they tend to spread, resulting in a wider range. Thus, when the range is narrow, the market volatility is lower and, vice versa.
It is recommended that traders use the indicator when trading the currency pair in the range. Thus, when the price approaches very close to the upper line, the pair of currency becomes overbought. On the other hand, the outer band widens automatically after the volatility increases and narrows down when there is a drop in volatility. Also, it is only ideal that you use the Bollinger Bands only after receiving confirmation from any other technical tool or indicator. Bollinger bands usually work well with trendlines, candlestick patterns, as well as other signals.
MACD, also known as Moving Average Convergence/Divergence is used for measuring the force that drives the market. It indicates when the forex market is unable to move in a particular direction and thus needs rest (or correction). Thus, MACD revolves around moving averages but also requires certain other formulas. In fact, it is a sort of technical indicator referred to as the oscillator. The oscillators are displayed in boxes under the pricing chart. Once an oscillator goes up, it must return back. Typically, this is what happens in the pricing chart too. However, while the MACD must return to 0 or even lower, the price drop will most likely be less or smaller. Thus, this is exactly how the MACD predicts price turns.
Traders who use the MACD indicator must look for dramatic fall and rise. As a result, they must sell once the histogram begins to decline after making a big advancement. On the contrary, they must buy after the histogram starts going up after a massive decline. Also, the crossovers that take place between the signal line and histogram are helpful in predicting precise market movements. Thus, traders must buy after MACD histogram goes beyond the signal line. On the other hand, they must sell after the MACD and histogram drops under the forex signal line.
Apart from this, zero line also serves as another source for confirmation. After the MACD surpasses the zero line, it displays the bears or bulls strength. However, after the MACD and histogram goes above 0, then the traders must buy and vice versa. This makes MACD one of the favorite forex prediction indicator.
Conclusion Forex Prediction Indicator
To sum up, technical indicators have their own set of benefits and disadvantages. However, using just one prediction indicator won’t help you. Traders must use at least 2-3 indicators for profitable trading.
In case you are searching for the best forex prediction indicators then visit our page of the Best Metatrader Indicators.