Proven Best Forex Indicators? Making money consistently from the forex market is not as easy as it sounds. But traders that know their onions are smiling to the bank; part of the reason is that they use the best forex indicators to enhance their trading strategies. Your intellect can fail you as you strive to make money regardless of your knowledge of the forex market. This is where proven best forex indicators come handy.
If you want to be successful trading forex, you need to use one of the best indicators to forecast the price changes of the currency pair you intend trading. Without it, you would just be running around a circle without making anything tangible on the market. Except you’re an expert, the chances are that you would make a wrong decision when it comes to choosing the proven best forex indicators that would suit your needs.
There are several forex indicators on the market. As such, you need to carry out extensive research to determine the genuine ones. Thankfully, we have done all the hard work for you. In this article, we will walk you through 5 proven best forex indicators for your consideration. So read on to know each of their features and decide which one to integrate into your trading arsenal.
What Are Forex Indicators?
Ordinarily, we would have skipped this section, but for those newbies out there that would someday stumble on this article, we find it pertinent to explain what forex indicators are and how they work.
Forex indicators are trading tools used to forecast price changes in a currency pair. Usually, they are calculations that take into consideration the price and volume of specific financial instruments. Indicators will help you to make an entry or exit decision. Plus, it eliminates guesswork and guarantees consistent profits. If you are trading on the MT4 platform, you would have the opportunity to add any forex indicator of your choice into the trading graph.
5 Proven Best Forex Indicators
In this section, we will highlight the best proven forex indicators that most expert traders are using to make consistent profit from the market. Let’s get started:
#1. Moving Averages
Do you want to determine the forex market trends to know whether to invest your hard-earned money or not? Then consider using moving averages. One of the proven best forex indicators and an all time favourite for the pro traders. This tool is potent and amazing. Most traders that you know or see that are making money are probably using moving averages. There are four types of moving averages; you can use them individually or jointly to achieve robust trading strategies. The following are the four types of moving averages:
- Simple moving averages
- Exponential moving averages
- Weighted moving averages
- Smoothed moving averages
Moving averages can be used in determining the exchange rate – high, low, open, or close. What’s more? The close is the most popular. Moving averages can be calculated by summing up the exchange rates over a given period and then divide the result with the number of periods. After the calculation, if the moving average lies above the exchange rate, a bearish signal would be sent to the trader. However, if the moving average lies below the exchange rate, a bullish signal would be sent to the trader. Moving averages thus gains its well deserved spot as our top 5 proven best forex indicators.
#2. The Relative Strength Index
The next forex indicator of our choice for the top 5 proven best forex indicator is the Relative Strength Index (RSI). This indicator was first published in 1978 by a famous technical analyst named J. Welles Wilder. Since then, it has been instrumental for traders to determine market trends and price changes.
The Relative Strength Index can be computed by comparing a currency pair amount with the most recent exchange rate increases to that of its most current exchange rate drops. The time period parameter can be adjusted; most traders prefer to use the default 14 periods. The value of RSI usually fluctuates between 0 and 100.
As you can see from the image below, the RSI was computed based on a 14-day daily closing exchange rate in orange for the EUR/USD currency pair.
#3. Bollinger Bands
This forex indicator was created in the 1980s by a renowned forex analyst popularly known as John Bollinger. Bollinger Bands was designed to provide trading signals for traders to leverage. They are drawn around a central moving average using standard deviations to measure market volatility. Forex traders, in turn, use these signals to sense the inherent risk on the market and thus take a favorable trading position. Definitely a must have for the serious forex and is our choice of the top 5 proven best forex indicator
Bollinger Bands work by selling a currency pair when the price is above the indicator’s upper line and buying when the price is below the indicator’s lower line. In the image below, you can see that two standard deviations were drawn around 20 days moving average using a specific exchange rate for EUR/USD currency pair.
#4. The Stochastic Oscillator
Another proven forex indicator that made it to our list is the Stochastic Oscillator. It was developed by George Lane in the 1950s to help forex traders identify lapses in the market for immediate corrections. Similar to the RSI that we discussed earlier, the Stochastic Oscillator is also between 0 and 100. In addition to that, it has oversold values that are below 20 and overbought values that exceed 80.
Each variable on this indicator’s graph has the characteristic %K line based on the market conditions per time. %D signal line can be calculated as a moving average of the %K line. This indicator can inform forex traders about distribution and accumulation on the market. If the market closes with stochastic remaining high, it means that there was a lot of buying pressure, which forced market accumulation. Similarly, if the market closes with stochastic remaining low, it suggests that there was selling pressure that involves distribution.
#5. The MACD
MACD stands for Moving Average Convergence Divergence and is a favorite proven forex indicator for seasoned traders. It was developed by Gerald Appel to solve the problem of guesswork when trading forex. It is unbounded and generally appears below the price action. Its time scale is the same as that of the exchange rate chart.
Here is how it works: The MACD uses the difference between two weighted moving averages and includes a smoothed moving average line. The image below shows the representation of the MACD in a graphical form. The image clearly shows a fast EMA of 12 periods versus a slow EMA of 26 periods for EUR/USD currency pairs.
Final Thoughts Proven Best Forex Indicators
Forex Indicators come handy if you want to take your trading career to the next level. Indicators will help you to make an entry or exit decision, and it will help you to eliminate guesswork. When choosing an indicator to work with, ensure you trade on a reliable platform. Each of these indicators would serve your trading needs, so you have nothing to worry about.
That’s not it. There are other wonderful resources to help improve your trading experience and increase your chances of making profit, so remember to look at them via this link.