Technical and fundamental analysis are key factors of success in Forex trading. It can give a trader an edge over others and help understand which assets are overestimated and which will show growth. But to carry out a good analysis, one should know where to look first. So, here are the top 10 Forex indicators that every trader should know.
1. Moving Averages
This is one of the most basic yet informative indicators. It represents an average closing price of candles over a certain time. It reflects market sentiment and can give you an idea if you should focus on buying or selling strategies, depending on whether the price is above or below the average line.
2. Relative Strength Index
The relative strength index takes values from 0 to 100 and indicates how likely the price is to reverse. If it reaches 70 and above, it means that the bear market is coming, and if it drops to 30, there will be a bearish reversal.
3. MACD
Moverage Average Convergence and Divergence indicator is another popular indicator that helps understand a trader chart and pick strategies. It features histograms and moving averages and is used to predict if the current market trend will continue or if there is going to be a reversal.
4. Bollinger Bands
This is one of the easiest to read Forex indicators. It consists of three averaging lines, two of which act as support and resistance levels. It gives valuable information about possible entry and trade points.
5. Stochastic
This indicator is similar to RSI and is used to determine zones where assets were overbought or oversold. Such zones open a profit-grabbing possibility for traders.
6. Ichimoku Kinko Hyo
This is a more complex indicator comprising several graphs. But it can give a broker enough information to create a comprehensive strategy. The indicator includes a Kumo cloud, which helps determine if the market is bearish or bullish, and two lines — Tenkan Sen and Kijun Sen — that indicate points of entry when the market movement doesn’t coincide with them.
7. Fibonacci
The Fibonacci sequence is used to determine the market movement and predict repetition using the golden ratio of 1,618. In Fibonacci retracement, the extreme points of the chart are divided by the key Fibonacci ratios to determine how they correlate. This way a sequence of support and resistant points is created to determine the next milestones of the market’s movement.
8. Average True Range
The average true range is used to determine the level of volatility in the market. This is a very important indicator as it helps to predict the market’s reversal and continuation. High volatility predicts soon reversal, while price stabilization indicates that the current trend will continue.
9. Parabolic SAR
One more indicator of market sentiment for an assets pair. If the price is above a SAR, the trend is bullish, in another case — bearish.
10. Pivot Point
This is a valuable indicator that helps determine equilibrium points for the assets — a price at which the supply and demand are equal. Financial markets always gravitate to equilibrium points, so knowing where the market moves after one is reached and where the others are can help determine the point of entry.
