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A Critical Overview of the Best Forex Indicators

Posted on | March 6, 2013 | Comments Off

Forex trading has become a very attractive business to many people, and this increasing demand has led many experts to conduct extensive research and bring out several innovations which have made currency trading more comfortable and easier. Forex indicators are one of such momentous innovations which are currently used widely to seek forex trading opportunities and make quick profits from currency conversion trading. Nowadays, traders have a lot of Forex indicators to choose from, and most indicators fail to provide accurate signals which get them late in the money making game. Only a few Forex indicators are available in the market which present the most appropriate signals and help traders catch the biggest trading trends.


The Bollinger Bands:

The Bollinger Bands is a Forex indicator that has been considerably successful over the last two decades. John Bollinger, the innovator, designed the indicator to demonstrate the constant volatility of the foreign exchange market. The Bollinger Bands makes the trends appear on the electronic screen in the most comprehensive and professional manner.

With good signals, the Bollinger Bands can easily be considered as support or resistance Forex indicators which tell traders before there is any move or if any reversal is going to occur. As currency price touches its lower band, the currency is regarded as oversold. On the contrary, currency is overbought as currency price touches its upper band.

Methodologically, users of Bollinger Bands tend to seek support for price-action as well as resistance levels. Based on years of experience, the Bollinger Bands bring in pretty high win percentage along profits on a consistent basis.


The Relative Strength Index or the RSI:

Having a reliable and predictive edge, The Relative Strength Index or RSI has emerged as a very powerful Forex indicator. J. Welles Wilder, the innovator, designed the indicator about 30 years ago. RSI is highly effective since it makes us know about the time when the price of currency is overbought or oversold prior to the beginning of the trends. This indicator enables traders to enter the currency market earlier and make large profit with minimum risk.


Simple Moving Average or the SMA:

Most Forex traders cannot use the SMA or the Simple Moving Average accurately. It is a very popular indicator which many traders use widely as an indicator for following trend while entering currency trades after the establishment of a particular trend. However, it is really crucial for most traders to use the SMA in a successful way like the way expert trades do. Most leading traders use the bounce method to get the most accurate and predictive indication. It means that they simply wait for the establishment of trend. Successful users of SMA do not enter trades randomly; rather, they wait until the price of currency retraces to the state of moving average as well as bounce off it.

With the inception of a reversal signal, traders should enter a particular trade in accordance with the trend direction with the stop loss option that lies right below the option of moving average. Bu doing so, traders can enter at a highly tactical point by virtue of stop loss to make huge profit margin.