Reliable indicators for Forex trading -

Introduction

Indicators are mathematical calculations that are used by traders to analyze past and present price data and help them make better informed trading decisions. There are many different types of indicators, each with its own strengths and weaknesses. Some indicators are better suited for trend trading, while others work better in range-bound markets. The most popular indicators are Moving Averages, Bollinger Bands, MACD, RSI, and Stochastics. These indicators can be used on their own or in combination with each other to form a trading strategy.

Here is my list of some reliable indicators that have proved the test of time.

Moving Averages

Moving averages – these help smooth out price action and can be used to identify trends.

Moving averages smooth out price action by creating a single flowing line that represents the average price over a set period of time. There are different types of moving averages, but the most common are the Simple Moving Average (SMA) and the Exponential Moving Average (EMA). The SMA simply takes the average price over a given period of time, while the EMA applies more weight to recent prices, making it more responsive to recent changes in price action. Both moving averages are lagging indicators, meaning they only provide information on past price action, not future price action. However, moving averages can be very useful in identifying trends, as well as support and resistance levels.

MACD

MACD is a momentum indicator that can be used to identify trend changes.

The MACD indicator is one of the most popular forex trading indicators. It is a momentum indicator that is used to show the relationship between two moving averages. The MACD indicator is a lagging indicator, which means it will follow the price. The MACD indicator is made up of two parts, the MACD line and the signal line. The MACD line is the difference between the 12 period EMA (exponential moving average) and the 26 period EMA. The signal line is the 9 period EMA of the MACD line. The MACD indicator can be used to show the trend, as well as to identify overbought and oversold conditions. The MACD indicator is calculated using the following formula: MACD = (12 EMA – 26 EMA) / 9 EMA The MACD indicator is shown on the chart as two lines. The MACD line is the blue line and the signal line is the red line. The MACD indicator is a lagging indicator, which means it will follow the price. The MACD indicator is used to show the trend, as well as to identify overbought and oversold conditions. The MACD indicator is a popular forex trading indicator because it is easy to understand and use. The MACD indicator can be used to show the trend, as well as to identify overbought and oversold conditions.

Relative strength index (RSI)

RSI is a relative strength indicator that can be used to identify overbought and oversold conditions.

Relative strength is a useful tool to help you predict the future direction of currency prices. It calculates the amount of price change in a given period by dividing the average gain by the average loss. This measure is very helpful for finding major reversals as the RSI can predict when a major trend will reverse. For example, if the EUR/USD pair is rising, and the Relative Strength Index shows a bearish trend, the probability of a bearish breakout is high.

In order to use RSI effectively, you need to be aware of the market’s trends. The Relative Strength Index provides buy and sell signals when it crosses over temporary overbought or oversold levels. This indicator is also very helpful for identifying potential reversals in the forex market. RSI signals are shown as dots on the chart. When the dots cross below the price of a currency pair, the RSI is a sign to buy, and if the dots move above the price, it is a sell signal. You can use this tool in conjunction with other technical indicators to make the best trading decisions.

Bollinger Bands

Bollinger Bands are a popular technical indicator that traders use to help identify overbought and oversold conditions in the market. Bollinger Bands are made up of a upper band and a lower band which are placed two standard deviations away from a simple moving average. The Bollinger Bands indicator is a great tool for helping traders find entries and exits in the market. The Bollinger Bands indicator can be used in a variety of ways but one of the most popular ways to use the Bollinger Bands is to look for price action signals that occur at the extremes of the Bollinger Bands. These price action signals can be used to enter or exit a trade. One of the benefits of using Bollinger Bands is that they help to identify price action signals that might not be as apparent on a price chart. Bollinger Bands can also be used to help identify overbought and oversold conditions in the market. When the market is overbought, it means that prices have risen too far too fast and it might be time to take profits or exit a trade. When the market is oversold, it means that prices have fallen too far too fast and it might be time to buy or enter a trade. The Bollinger Bands indicator is a great tool for traders to use in their technical analysis. Bollinger Bands can help traders find entries, exits, and identify overbought and oversold conditions in the market.

Parabolic SAR

The Parabolic SAR is a technical indicator that helps determine the direction of a price movement. Its use is particularly useful in trending markets where the price will often rise or fall in one direction or another. The indicator is often prone to false signals in sideways markets, but in a strong trending market, it can give a reliable exit signal when a reversal is possible.

The SAR indicator is based on the assumption that the price is either in an uptrend or downtrend. However, it can also show stationary price behavior or small oscillations. When the price is stationary, the SAR will give more signals, but the signals will be less reliable.

Pivot points

Pivot points are used by traders as a predictive indicator and denote levels of technical significance. When used in conjunction with other technical indicators such as support and resistance or Fibonacci, pivot points can be an effective trading tool.

Pivot points are calculated using the high, low, and close prices of a previous day, week, or month. The most common time frame for calculating pivot points is the daily time frame. However, weekly and monthly pivot points are also used.

The most common pivot point is the daily pivot point. This is calculated using the previous day’s high, low, and close prices. The daily pivot point is then used to calculate the support and resistance levels for the current day.

The weekly pivot point is calculated using the previous week’s high, low, and close prices. The weekly pivot point is then used to calculate the support and resistance levels for the current week.

The monthly pivot point is calculated using the previous month’s high, low, and close prices. The monthly pivot point is then used to calculate the support and resistance levels for the current month.

Fibonacci levels

The Fibonacci levels are a very popular tool that is used by many forex traders. The Fibonacci levels are based on the Fibonacci sequence, which is a series of numbers that start with 0 and 1, and each subsequent number is the sum of the previous two numbers.

The Fibonacci sequence looks like this: 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233..

The Fibonacci levels are often used in technical analysis and are considered to be important support and resistance levels. The most important Fibonacci levels are 0.0%, 23.6%, 38.2%, 50.0%, 61.8%, and 100.0%.

The 0.0% Fibonacci level is considered to be the starting point of the Fibonacci sequence and is often used as a reference point for calculating the other Fibonacci levels. The 23.6% Fibonacci level is considered to be a very important support level and is often used as a target for buying pullbacks in an uptrend. The 38.2% Fibonacci level is considered to be a important support or resistance level and is often used as a target for buying or selling pullbacks in a trend. The 50.0% Fibonacci level is considered to be a important support or resistance level and is often used as a target for buying or selling pullbacks in a trend. The 61.8% Fibonacci level is considered to be a very important support or resistance level and is often used as a target for buying or selling pullbacks in a trend. The 100.0% Fibonacci level is considered to be the end of the Fibonacci sequence and is often used as a target for taking profits.

The Fibonacci levels can be used in a number of ways, but the most common way is to use them as:

Support and resistance levels

When the market is in an uptrend, the 23.6%, 38.2%, and 50.0% Fibonacci levels can be used as support levels to look for buying opportunities. When the market is in a downtrend, the 61.8% and 100.0% Fibonacci levels can be used as resistance levels to look for selling opportunities.

Fibonacci retracements

A Fibonacci retracement is when the market retraces a certain percentage of the previous move. The most common Fibonacci retracements are 23.6%, 38.2%, 50.0%, and 61.8%. To calculate a Fibonacci retracement, you need to find the high and low of the previous move. For example, if the market is in an uptrend and the previous move was from 1.2000 to 1.3000, the 23.6% Fibonacci retracement would be 1.2000 + (1.3000-1.2000)*0.236 = 1.2268. This means that the market could retrace to 1.2268 before continuing higher.

Fibonacci extensions

The Fibonacci levels can also be used to calculate Fibonacci extensions. A Fibonacci extension is when the market extends a certain percentage of the previous move. The most common Fibonacci extensions are 161.8%, 261.8%, and 423.6%. To calculate a Fibonacci extension, you need to find the high and low of the previous move. For example, if the market is in an uptrend and the previous move was from 1.2000 to 1.3000, the 161.8% Fibonacci extension would be 1.2000 + (1.3000-1.2000)*1.618 = 1.4954. This means that the market could extend to 1.4954 before reversing lower.

Indicators can be a valuable tool for traders, but they should not be relied on exclusively. Indicators should be used in conjunction with other forms of analysis, such as price action and market fundamentals, to form a well-rounded trading strategy

Candlestick patterns

Candlestick patterns are a popular way to analyze the forex market. These patterns provide a way to make short-term predictions about market direction.

The most common candlestick patterns are:

The hammer and the hanging man

These patterns look alike, but have different implications. A hammer occurs when the market is falling and then rallies, creating a candlestick with a small body and a long lower shadow. This indicates that the market is starting to turn around. A hanging man occurs when the market is rallying and then falls, creating a candlestick with a small body and a long upper shadow. This indicates that the market may be about to turn around.

The bullish engulfing pattern

This pattern occurs when a small candlestick is followed by a large candlestick that completely engulfs the small one. This is a bullish pattern that indicates that the market is about to turn around and start moving up.

The bearish engulfing pattern

This pattern is the opposite of the bullish engulfing pattern. It occurs when a large candlestick is followed by a small candlestick that completely engulfs the large one. This is a bearish pattern that indicates that the market is about to turn around and start moving down.

The morning star and the evening star: These patterns are three-candlestick patterns that indicate a reversal is about to occur. A morning star forms when the market is falling and then rallies, creating a small candlestick followed by a large candlestick. This is followed by another small candlestick. An evening star forms when the market is rallying and then falls, creating a large candlestick followed by a small candlestick. This is followed by another large candlestick.

The doji

This is a single candlestick pattern that indicates that the market is undecided. The doji has a small body with a long upper shadow and a long lower shadow. This indicates that the market is equally balanced between buyers and sellers.

The bullish and bearish harami

These are two-candlestick patterns that indicate a reversal is about to occur. A bullish harami forms when the market is falling and then rallies, creating a small candlestick that is completely engulfed by a large candlestick. This is followed by another large candlestick. A bearish harami forms when the market is rallying and then falls, creating a large candlestick that is completely engulfed by a small candlestick. This is followed by another small candlestick.

These are just a few of the most common candlestick patterns. There are many more that can be used to analyze the market.

Stochastic

A stochastic indicator is a tool used in technical analysis to measure momentum. Momentum, simply put, is the rate of change in price. The stochastic indicator is used to identify potential turning points in the market, as well as overbought and oversold conditions.

The stochastic indicator is based on two lines, the %K and the %D. The %K is the main line and is a measure of the current price level relative to the high/low range over a given period of time. The %D is a signal line that is a moving average of the %K.

The stochastic indicator can be used in a number of ways, but the most common is to look for divergences. A bullish divergence occurs when the %K line crosses above the %D line while prices are in a downtrend. This is seen as a potential turning point and an indication that prices may begin to rise. A bearish divergence occurs when the %K line crosses below the %D line while prices are in an uptrend. This is seen as a potential turning point and an indication that prices may begin to fall.

The stochastic indicator can also be used to identify overbought and oversold conditions. A reading of 80 or above is considered overbought, meaning that prices are likely to fall. A reading of 20 or below is considered oversold, meaning that prices are likely to rise.

The stochastic indicator is a powerful tool that can be used in a number of ways to help you make better trading decisions.

Conclusions

Indicators can be a valuable tool for traders, but they should not be relied on exclusively. Indicators should be used in conjunction with other forms of analysis, such as price action and market fundamentals, to form a well-rounded trading strategy.