There are literally dozens of indicators that you
can use to tell you when to buy or sell a currency pair. If you try to use too many at once, you will
end up confused and possibly make the wrong decisions. It is better to find two or three indicators
that you can rely on. Here are some of
the most popular one to use.
The
Simple Moving Average
Moving averages are the most commonly used
indicator, not just in the Forex market but in any market. With the simple moving average, or SMA, there
are only two criteria used. They are
called the period and the price. The
period is the time that the average is calculated and the price is the price
point used. It can be the open price,
the high, low, or mid-range price or a combination.
SMAs are most effective when used over a longer
period of time, and they are often used to follow trends.
The
Momentum Indicator
The momentum indicator is easy to calculate and is
easy to use. It uses the current closing
price and the closing price for a certain number of bars before. One of the attractions traders have for using
this indicator is that it can predict changes before the price indicates it.
The
Exponential Moving Average
This indicator was developed because the SMA was
considered too slow. It gives more weight
to the most recent price action and less consideration to older
information. It is more useful on short
periods of time than the SMA.
The danger in using this indicator is that it tries
to predict trends and has a higher risk of being incorrect.
The
Relative Strength Indicator
This is one of the most widely used indicators for
Forex traders. It is used to tell how
overbought or oversold a currency pair is.
It will also help indicate if a trend is going to be bullish or bearish.
These are just a few of the indicators you can use,
but they are some of the most common and best tested.