When they first start trading in forex markets, traders tend to complicate things. This is a sad but unavoidable fact. Many traders believe that complex trading strategies with many moving parts are better than simpler ones. Instead, they should be focusing on simplicity. Simple strategies allow for quicker reactions and less stress.
You should start by looking for the most simple and effective strategies to identify trades.
FIND THE BEST FOREX Indicators for a SIMPLE Strategy
A trading plan with chart indicators and some rules about how to use them is one way to simplify trading. To keep with the principle that simplicity is best, you can learn four indicators quickly to help identify entry and exit points for trading.
- Moving Average
- RSI (Relative Strength Index).
- Slow Stochastic
A simple plan with clear rules is your best friend once you trade a live account.
FOREX INDICATORS FOR READING CHARTS FOR DIFFERENT MARK ENVIRONMENTS
When determining the currency's value relative to another currency, there are many factors. Many traders prefer to use forex indicators to find trading opportunities.
You'll see two market environments when you look at the charts. These are either ranging market with strong support and resistance or floor and ceiling markets where price isn’t breaking through, or a trending or rising market.
Technical analysis is a tool that allows traders to identify trending or range bound environments. Then, they can find higher probability entry or exits based upon their readings. It is easy to read the indicators by simply placing them on the chart.
TRADING WITH MOVING AVARANGES
Moving average is a great indicator for forex trading. It is easier for traders find trading opportunities that follow the overall trend. To identify a trend in the market, you can use the or multiple moving averages.
The moving average is simply a line plotted that measures the average price for a currency pair over a certain period of time. For example, the last 200 days of price action. This helps to understand the overall direction.
You will notice that a trade idea was created above by adding some moving averages to your chart. You can identify trade opportunities using moving averages by identifying currency pairs that move in the same direction as the moving average and then exiting when it moves the opposite.
TRADE WITH RSI
Relative Strength Index, or RSI, is an oscillator that's simple to use and very useful. The RSI is an oscillator that helps you identify when a currency has gone too far. The RSI is a good indicator for those who prefer to 'buy high and sell low'.
You can use the RSI to find better exit and entry prices in trending markets. You can either take buy or sell signals when markets are not in a clear direction. Trending markets make it easier to decide which direction to trade. This benefit is called trend trading. You should only enter the trend direction if the indicator has recovered from extremes.
The RSI oscillator is plotted with values between 0 to 100. A 100 value is considered to be overbought, indicating a potential reversal towards the downside. However, a 100 value is usually considered to be oversold. You would identify an uptrend by looking at the RSI readings above 30 to determine if it is reversing before you enter the trend.
TRADE WITH STOCHASTICS
Slow stochastics, an oscillator similar to the RSI, can help you spot overbought and oversold areas, potentially causing a reversal of price. The distinctive aspect of trading using the stochastic indicator are the two lines, the %K line and the %D line that signal our entry.
The oscillator shows the same overbought and oversold readings. To identify a strong buy signal, simply look for the line that crosses above the line at the 20 level.