Forex Trading Indicators - The Keys To Finding Forex Success
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Forex traders are always on the lookout for the perfect moment to enter and make a move on the markets. They seek out tell-tale signs that scream buy this or sell that. As with many other trade markets, there is no one way to exchange currency, which is why it is important for you to learn common indicators that can help determine the best moments to buy/sell Forex cross rates. The following are your keys to success in the form of Forex trade indicators:

• Trend-following tool – While you can make money in Forex trading using a countertrend approach, most traders find recognising the direction of major trends and trading in the same direction an easier approach to making a profit. This is where tools that help recognise and follow trends come in handy. Just the same, a lot of people misunderstand the purpose and value of these tools and use them as a separate trading system, when their real purpose is to determine and suggest whether you should consider entering a long or short position. Take a moving average crossover for instance. It represents the average closing price over a particular number of days. A trend following tool can help you track its movements and make the decision to enter a short or long term position.

• Trend-confirmation tool – Trend following tools, while efficient in monitoring whether a given currency pair is going up or down, are prone to getting whipsawed. Because of this, you also need a way to gauge if you are using an appropriate trend following the indicator. This is where trend confirmation tools come to play. Like the first, type of trading indicator a trend confirmation tool may or may not generate specific buy or sale signals. Rather, it sees to it that the trend following and trend confirmation tools used agree with each other. A popular and widely used trend confirmation tool is the moving average convergence divergence or MACD, which measures the difference between exponentially smoothed moving averages and then compares the resulting difference to a moving average of its own. An uptrend is confirmed when the current smoothed average is greater than the base moving average.

• Overbought/oversold tool – This type of tool helps traders to be more comfortable in jumping into a trade once a clear trend has been established. On the other hand, you can also choose to wait for a pullback within the overall primary trend in hope that it will offer a lower risk opportunity. A lot of indicators can fit this bill, among which is the relative strength index, which calculates the cumulative sum of up and down days over a window period and determines its value, which can range from 0 to 100. If price action is to the downside, the indicator will approach 0. visit


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