If you are looking for a way to make your forex trading strategy more effective or you just need help with your trading, have you ever heard of forex indicators? They are online tools that are built to help traders optimize their trading strategies. In today’s article, we will explain to you the nature of forex indicators as well as the most common ones that all traders are using.
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A forex indicator is a statistical tool that forex investors use to evaluate the direction of the price action of a currency pair. The forex indicator comes in many forms, including the trend indicator, the confirmation indicator,... Common forex indicators include the MA (moving average), the relative strength index (RSI) etc. Choose the indicators that match your trading strategy.
Now that you know what an indicator is, we are going to look at three common indicators used for day trading.
The first indicator is more than an indicator and is close to an array of knowledge in technical analysis. Because trading in a short time frame puts investors in the complex situation of market lag. Price Action is one of the common ways of technical analysis with a short-term approach.
The reason it is so popular is because Price Action removes technical indicators from the equation, focusing instead on prices and prices only. Price Action can be used to identify trends, support and resistance levels and to show investors potential opportunities to enter the market.
By noticing prices, reversals, or changes in market trends that have occurred in the past, investors can find stops when the market breaks them (a new bottom when buy, or a new peak when selling) a trade will close to minimize losses. Price Action can be a useful tool for managing risk and trading.
Another very simple indicator to use is the moving average, which is a component of the general chart of short-term investors. Moving averages are often used for trend analysis. Therefore, if the price is above the MA, the trend is said to be going up, if the price is below the trend it is considered to be going down. It can work effectively in different time frames when the trend is categorized as long and short term charts. Investors can also use the MA line to open a new position. The crossover of moving averages is one of the common ways to trade and with this method. Traders simply look for the price to cross the MA line to start a position. ro and transactions.
There are many ways to identify support and resistance levels. Investors can use price action to confirm any particular level. But what is especially interesting for short-term investors is "integer psychology".
Integer psychology is actually very simple, which is the rounding values on the chart. For example 1.3900, 1.3800 and 1.3700 are rounded numbers in EUR / USD, because each price ends in "00". But we can take it a step further with the values between these three values, 1.3850 and 1.3750 are also rounded numbers.
For example, the actions of the EUR / USD pair are shown in the chart below. In a trendy market, the level of 1.3850 is a temporary support level when the pair's price cannot break. Eight hours later that momentum returned to the market when the level finally sold, and 1.3750 as a support level soon thereafter. This is one of the most used forex indicators in the market.