What Are Forex Indicators? What are the forex technical indicators (trend indicators, momentum indicators, volatility indicators)? How to trade using MACD, Moving Average and Bollinger Bands indicators?
Hello gentlemen traders! Technical analysis is based on the assumption that all information about a trading instrument is reflected in the market price. You only need to analyze historical data, such as price or volume, to determine whether the price of a trading instrument will rise or fall in the future. Over time, technical analysts have developed many Forex indicators to help traders solve this problem. We have prepared a guide for you that will help you understand what Forex Indicators are and how to apply them to trading.
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What are Forex Indicators?
We negotiate for a positive outcome or, in other words, a profit. Many newbie traders want to know if technical indicators can give them good trading signals. The truth is, technical indicators won’t automatically lead you to a profit, but they’ll do a great job for you. There is no doubt that an experienced trader can make a profit without using indicators, but they can help a lot in trading nonetheless.
BestForexMt4Indicators are based on a mathematical formula. These formulas allow you to quickly calculate various price parameters and then visualize the result on a graph. You don’t have to calculate anything yourself. You just have to go to the MetaTrader 4 menu, click on “Paste”. And then select the indicator you want to add to the chart. This can also help you in identify the best stocks to buy right now.
Technical indicators carry out their calculations only based on prices in foreign currencies. As a result, indicators have weak points: they can redraw themselves or lag behind the price (for example, the price has already fallen and only then has the indicator given a sell signal).
The advantage of using indicators is that it saves you time on market analysis and helps you find a trading idea for your strategies.
Best Forex Indicators
Technical indicators are divided into several groups according to their purpose (trend indicators, momentum indicators, volatility indicators, etc.). Since the objectives of the indicators are different, the trader does not need just one, but a combination of several indicators to open a trade. In this article, we are going to talk about the 3 most popular technical indicators.
- The moving average is the best indicator of trend
The moving average (MA) is a trend indicator that helps determine the direction of a trend on a chart. MA shows the average price for the selected period.
Simply put, the moving average indicator tracks the price. It helps to dampen price volatility and remove unwanted market “noise”. This allows you to focus on the underlying trend and not on the corrections. It is necessary to understand that this indicator does not predict the future price, but reflects the current direction of the market.
- Bollinger bands – Volatility indicator
Bollinger bands help to measure market volatility (i.e. the degree of price change). The Bollinger Band indicator consists of 3 lines. Each row (strip) is an AM. The middle line is usually SMA with a period of 20. It determines the direction of the trend – just like the MAs described above. The upper and lower bands (or “volatility” bands) are shifted two standard deviations above and below the middle band.
Simply put, the Bollinger Band indicator creates a channel around the price which, depending on current volatility, expands and then shrinks. The narrower the range, the lower the market volatility, and conversely, bands expand when the market becomes more volatile. The price constantly hovers around the middle line. She can test levels outside of the outer lines, but only for a short time, and can’t go far. After such a deviation from the centre of the price, it will be necessary to return to the centre.
- MACD is the best indicator of impulse
MACD (Moving Average Convergence / Divergence) measures market power. It is the most popular indicator among traders. This shows that the market is tired to go in one direction and needs a rest (correction).
The MACD Histogram represents the difference between the 26 and 12-period exponential moving averages (EMA). It also includes a signal line (9-period moving average).
There are many free forex indicators for MT4 and you as a trader should use the ones that can help you make money. One approach would be to use a combination of indicators in your strategy. You can select an indicator from each group. You can also use only one indicator, but it is better to use it after confirming the signals of different time frames. For example, you open a long position if your indicator gives a bullish signal simultaneously on a five minute, 30 minute and hour chart. Before using a technical indicator, you must first test it on historical data. If this indicates a profitable trade on the history, you can access the demo account or a real trading account.