The best forex indicator

Many traders want to build a trading strategy based solely on computer screens. This is mainly due to the fact that browsing history, old quotes and charts for past periods, traders see a close operation - perfect of all signals received from the selected indicator. So it's good, but why, then, in practice, the indicators and strategies of the adviser take over most of the losses and the deposits are finally drained? In this article, we will determine what assistance can provide indicators of the trader how to use it correctly and choose the best forex indicator for a particular situation.

To use indicators to understand the nature, characteristics and principles they are built. Let's start with the definition of the term "indicator". So, forex indicators - tools for analysis, which are based on algorithms to build and convert market data. This must make a very important point, first the price, quota, and data indicators appear after. In fact, this is their main weakness is why trade, relying only on indicators is not.

Now we will see what indicators and when to use certain types of indicators. To begin distinguishing three main groups of indicators:

  • Trend indicators;
  • Oscillators;
  • Volume Indicator.

In that order, the indicator shows the trend of traders to determine which direction the market will be - up, down or sideways on the market. As you can imagine, this type of indicator can give a clear signal to buy or sell, the trader is based on data the indicator will determine the direction of the trend and accordingly try to trade with the trend. The best forex indicator to determine the trend - Moving Average, ADX.

Moving Average (MA) - if the price is above the MA, it means that the upward movement of the market, vice versa - downwards. When the price chart and overlap of the MA line can be stated that there is a lateral movement. The important parameter is the Moving Average period, the standard is 14, but some traders use 50, 100 and 200 day moving averages. The longer the period, the more accurate, but at the same time and more globally can determine the direction of the trend.

ADX (Average Directional Index) - shows the strength of the current trend. The greater the value of zero, the stronger the trend. Note that the indicator does not indicate the direction of the trend, it must determine the trader directly. This is not difficult, you only need to look at the price chart, if the indicator value, for example, is greater than 20 on the chart and the price increase is a rising trend.

Next on our list a group of indicators is called an oscillator. This indicator is used by traders during lateral movements, with the oscillator movement trend indicator not causing much interest. The best forex indicators of oscillators - RSI and MACD.

RSI (Relative Strength Index) - this oscillator is probably the most popular. This shows overbought and oversold markets. Traders need to look at the screen, the intersection level 70 or 30 shows a possible reversal in price. As mentioned earlier it is best to use RSI during lateral movements, if the market is a strong trend, indicators may be a long time in one of the two countries.

MACD (Moving Average Convergence / Divergence) - This indicator is different from a standard oscillator. First, it might indicate the direction of the trend, if the histogram indicator is above zero then the upward, downward trend is below zero. Second, it allows us to find examples of divergence and convergence, in simple words it is a force that matches market prices. More details about analysis using MACD we will write immediately.

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Finally, the last group of volume indicators. Their main function is to inform traders of activities on the market. So, for example vertical volume allows to determine the rate at which activity increases, that is, prices may face resistance or support around them. Unfortunately, the best forex indicator on volume is available in MetaTrader 4, so traders use third-party indicators that can be found on a wide network or other platforms.

Using LEDs can greatly facilitate trade. It is important to remember that the signal from this is optional and cannot be selected as the basis for the opening position. Also, in many situations, there is the best forex indicator that helps traders to decide on further actions. Good luck trading!