Trading is a technical analysis of the market that allows you to perform operations that generate profit, and this has become one of the most popular means of income of all the year. Forex is one of the most used platforms as it has tools that facilitate analysis , such as indicators.
Do you want to know the best? We describe them all for you.
Top 7 Forex Indicators
1 Media Mobile (MA)
One of the most popular and best first indicators is the MA or the simple moving average, which is responsible for showing the direction of current price trends , but yes, without causing interference in the peaks of shorter prices in a much shorter time frame.
This indicator also has a characteristic that stands out, which is that it combines the prices of a financial instrument and divides it between the number of data obtained in order to provide a trend path.
The data used depends on the length of the MA. An example of this is that a 200-day MA will require 200 days of data, also by using this indicator, you will be able to notice and analyze the support and resistance levels and the effects they cause on prices when producing the action. of this, which means that this will also determine the patterns that will be carried in the future.
2 Exponential Mobile Media (EMA)
Another of the most famous indicators is the EMA which is another form of moving average. This has as a difference from SMA that gives greater weight to the most recent data points, thus obtaining the possibility of the data collected when with better and new information.
When this is used in line with other types of indicators, the necessary help can be obtained for investors to confirm the most significant movements in the market and thus be able to verify their legitimacy.
The exponential moving averages that are most congruent are those of 12 and 26 days for short-term measures, while those of 50 to 200 days are responsible for working with indicators that have long-term trends.
3 Stochastic oscillator
On the other hand, a stochastic oscillator is a type of indicator that is responsible for buying the specific closings of an asset, as well as its range in prices over time, thus showing the strength of the trend and momentum. This uses scales that go from 0 to 100.
If we take as an example a reading below 20, this usually indicates that the market has been oversold, while a reading above 80 indicates that there is an overbought market. It is worth noting that if there is a strong trend, a correction or a rally will not only be shown.
4 Moving Average Convergence or Divergence (MACD)
MACD is a style of Forex indicator that works in such a way by indicating changes in momentum by comparing two moving averages. This can help investors to indicate which are the possible buying and selling points taking into account the levels of support and resistance.
Convergence means that the two moving averages are moving closer together, while divergence is moving away from each other.
If the two moving averages converge with each other, it gives us to understand that the momentum is decreasing, while if they are divergent, the momentum increases.
5 Bollinger Bands
One of the most complex indicators but that manages the most results is that of the Bollinger bands, which is presented as an indicator that shows a range within it where the price is an asset that is generally traded.
The width of the band can be increased or decreased to show recent volatility. The closer these bands are, or the narrower they are, the less volatility they present depending on the financial instrument.
On the other hand, if these bands are wider, then the volatility will be much higher. These are very useful to identify when an asset negotiation is outside the common levels, so they are used as a method to predict the moments that this will give in the long-term prices.
When the price is moving constantly outside the upper parameters of the band, it will give us to understand that it may be overbought, while, if it moves below, it is oversold.
6 Relative Strength Index (RSI)
RSI is another indicator that is used among the first options to be able to help investors to identify momentum, warning signs that present a dangerous movement in displayed prices and market conditions.
This is expressed with figures ranging from 0 to 100. For example, if an asset is around level 70, it is considered to be overbought, while if it is at a level close to or 30, it is that is oversold.
An overbought warning will tell us that short-term earnings may soon reach their expiration point, and that assets may be subject to price correction.
As a counterpart, if it is a sign of overselling, we could interpret that there are short-term declines that could be reaching their expiration point and that the assets would be subject to a rally.
7 Fibonacci retracements
Finally, Fibonacci retracements are a type of indicator that is responsible for showing the degree to which a market will behave against its current trend. This setback occurs in the market when it experienced a temporary fall, which can also be determined as a pullback or a slowdown.
Investors often use this indicator to confirm these movements and also to identify possible support and resistance levels that might show that a trend is up or down. In this way they can discern how to apply stops and limits or when their positions will open or close.