What Are The Best Indicators In Forex? One of the most important factors for a new forex trader is indicator analysis. Indicator is also used as indicator in technical terms. Both terms mean the same thing. For this reason, we will examine the best and easiest types of indicators that you can use.
What do indicators do for us? Its most basic feature is an important factor in US analyzing the support or resistance level of the product before processing. For this reason, indicators are one of the important auxiliary factors that we can benefit from throughout our trading life.
Every professional forex trader analyzes the data presented by the indicators before opening a trade. In order to be a good investor, you should definitely examine your indicator Analyses.
Detailed descriptions of the types of indicators that we can recommend to you are available on our website. How can you use which indicator? we’ll have him review it in our article.
Forex Best Indicators
Swing trading is a strategy that aims to identify a trend and realize gains within a few days or weeks. It is the opposite of long-term trading, which aims to capitalise on trends in a few months. It is also slightly different in day-to-day transactions, which look at the opening and closing of transactions within a day.
Swing (swing) investors use different trading strategies, including candlestick analysis, Elliot Wave, price movement, and technical analysis. In this report, we will look at the best swing trading indicators you should consider using.
Exponential Moving Average
Moving averages are among the most popular technical indicators on the market. In fact, adverbs form the basis of many other popular indicators, such as moving average convergence and divergence (MACD) and Bollinger Bands.
There are several moving averages, such as simple moving average (SMA), exponential moving average (EMA), Hull moving averages, softened MA, and Arnaud Legoux MA. Of all this, I prefer to use the EMA for swing trading because it usually eliminates the delay by giving more weight to the final price.
Swing investors use EMA in a variety of ways. First, there are those who use it to follow a trend. For example, a 28-period EMA is used for the following EUR / USD pair. As you can see, the upward trend continued as long as the price was above this moving average. In this case, a sell signal usually occurs when the price falls below average.
As an example, you can review the use of EMA in the following trend.
Swing investors can also use the EMA to determine returns. A popular way to do this is to combine the longer (slow) and shorter (fast) moving average. In this case, a reverse signal usually occurs when two averages make a pass. An example is shown in the EUR / USD pair below.
Using EMA to define a transition
Also known as Ichimoku Kinko Hyo. It is old and also one of the best swing trading indicators in the market. Indicator chikouspan (delay, interval) Kijun-Sen (baseline), Tenkan-Sen (conversion line), a range senkou (leading a December) and range senkou B (leading to December) consists of five lines known as. B).
Investors use the Ichimoku Kinko Hyo indicator to identify new trends, confirm a consolidation phase, and determine a reversal. They do it in a variety of ways. First, they use the cloud to confirm that a trend is forming. For example, in the chart below, we see that EUR / USD tends to rise. To confirm that a new trend has actually occurred, the investor can look at a time when the price has risen above the Red Cloud. If the Trend changes color, the trend is further confirmed.
Ichimoku cloud migration example
Another strategy for identifying buy and sell signals using the Ichimoku cloud involves removing clouds and continuing conversion and fundamentals. In this, a purchase signal occurs when the two lines make a crossing, as shown below.
Ichimoku basic and transformation lines crossing
Relative Strength Index (RSI)
The Relative Strength Index is a popular swing trade, mostly used to determine overbought and oversold situations. It was developed by Welles Wilder, who also developed other indicators such as parabolic SAR and mean true December (ATR). The RSI is usually between zero and 100.
Investors use RSI in a variety of ways. First, they use it to identify overstretched States in a currency pair or stock. Basically, they use Level 30 as the oversold level and level 70 as the overbought level. So when an asset reaches an oversold level, it takes it as a buy signal, and vice versa.
A good example of this is in the EUR / USD pair below. As you can see, parity is starting to drop when the RSI is at an overbought level. Also, a reversal occurs when you are at the oversold level.
RSI indicator example
There are two main things you need to know when using RSI in swing trading. First, the period is an important part of the indicator. Most trading platforms have 14 by default, but you can change this to suit your trading style. Second, you have to be careful about overbought and oversold levels. This is because, in some cases, the price tends to maintain the trend even after the two levels have been reached. The secret to using it well is to expect an inversion model to be well defined. A good example of this is shown below.
Caution should be exercised when using RSI.
Money Flow Index (MFI)
The Money Flow Index (MFI) is a volume-based indicator that is relatively similar to the Relative Strength Index (RSI). In fact, it is also known as the mean weighted RSI. Developed by Gene Quong, the indicator is used in swing operations to determine extreme levels.
The index is calculated by first calculating the typical price obtained by dividing the high, low and closing price by three. You then calculate the flow of Raw Money by multiplying the typical price by volume. Then, you calculate the money flow rate by dividing the positive and negative money flow. Finally, you use the following formula to calculate the MFI:
MFI = 100-100 / (1 + money flow rate).
Like RSI, MFI ranges from 0 to 100. Overbought levels start at 80, oversold levels start at 20. A good example of this is the EUR / USD pair below.
Money Flow Index example
Like RSI, MFI can send false signals. Even after reaching the oversold level, the price can continue to fall. An important secret to dealing with this is to use MFi with other indicators, such as moving averages. It is also important to adjust the time depending on your trading strategy.
Bollinger Bands are a popular trend and indicator of volatility. The indicator has three lines, the 20-day Simple Moving Average (SMA) in the middle. The upper and lower lines are 2 standard deviations above and below the midline. Investors use it in a variety of ways in swing trading.
First, they use it to map the strength of the trend. In a very strong upward trend, the price is usually along the top line of the Bollinger Band. Similarly, in a very strong downward trend, the price is usually at the bottom line of the band.
Another strategy is to determine support and resistance. In this, when the price reaches the bottom line of the bands, they buy short when they reach the top, as shown below.
How To Use The Best Indicators In Forex?
Technical investors are important tools in swing trading. However, all the indicators mentioned above have limitations. For example, the price may continue to rise even after the RSI is overbought. To reduce these limitations, we recommend using a combination of several indicators to confirm a trend or return.