Using Indicators for trading in Australia
A slew of various strategies for trading may greet you when your forex trading trip begins. However, with just one of four chart indicators, most trading possibilities may be readily recognized.
Once you’ve learned how to utilize the Moving Average, RSI, Stochastic, and MACD indicator, you’ll be well on your way to executing your trading strategy like a champ. A free reinforcement tool will also help you utilize these forex indicators on a daily basis.
You’ve probably heard of indicators for forex trading. They can help you find trends, predict reversals and generally guide your forex trading decisions. Indicators are mathematical calculations based on price history which give you information about the market’s momentum or trend.
Some examples of popular indicators are moving averages, oscillators, volatility indices, ADX, and Bollinger Bands.
Today we’re going to take a closer look at how brokers like Saxo to use these indicators for maximum benefit in your forex trading strategy.
The benefits of a simple strategy
When traders first enter the forex market, they frequently overcomplicate things. This is a sad truth, however it is indisputably true. Traders frequently believe that a sophisticated trading approach with numerous moving elements must be superior, but this is not the case. The quick reactions and reduced stress associated with a simple technique are beneficial in this situation.
If you’re just getting started, keep it simple and go with the most effective and easy methods for recognizing trades.
Discover the best forex indicators for a simple strategy
A trading plan that includes chart indicators and a few rules on how you should utilize them might help you simplify your trading. There are four easy indicators you should be aware of using one or two at a time to identify trading entry and exit points in keeping with the notion that simplicity is preferable:
- Moving Average
- Slow stochastic
- RSI (Relative Strength Index)
A simple strategy with basic regulations will be your greatest ally if you trade a live account.
The most important indicator is price movement itself. No matter what other data you have – economic reports, news releases – it doesn’t matter too much unless you have a picture of where the currency pair is going right now.
You should always use price action to guide your decisions. Economic reports are significant events that have a big impact on the market, so you should know when they are out—but you can’t base your strategy purely on them.
An entry point is where you expect the price movement to reverse, and occurs when an indicator reaches a certain level (so if there’s resistance at 1.4000 and the RSI reaches 70, buy). An exit point is where you expect it to continue moving in the original direction; this happens when your indicator reverses course and moves to an extreme value (eg: from above 80 down below 20), or vice versa (from below 20 up above 80).
You do not trade every time the price meets one of these points; instead, you’ll hold onto a position until it starts moving in the other direction. If you bought at 1.4000 and it touched 70 on the RSI, for instance, you wouldn’t sell immediately – that’s a false level.
You should only take a signal if the price reverses from that level, or crosses further into “extreme” territory (eg: going much higher than 1.4050).
Indicators should aid, not determine
When using indicators, it is important to remember that they are not silver bullets.
No indicator can tell you everything about where the market is going.
Even experienced traders rely heavily on them because they provide technical analysis with another data point to consider when making trading decisions.
In conclusion, there are many tools out there – from simple line charts to complex volatility indices – that can help you find information about market activity and momentum, then use that data when making trading decisions.
The idea is to complement price action with other tools for a more complete picture of where the market is going and gain an edge over others in the forex trading space.