If you’re new to Forex, chances are you’re still a little confused about all the charting and how to properly choose and invest money in currency pairs. Fact is, this highly fluid market relies on a lot of factors in its movement – which means that indicators become even more crucial if you’re a beginner.
But what indicators should you invest on? Following are some of the Forex top indicators that should be part of your army as a new Forex trader.
RSI or Relative Strength Index
An incredibly popular indicator, RSI is often used to determine which markets are overbought and oversold. In simple terms, anything below 30 in RSI indicates oversold while anything beyond 70 is overbought. They’re also very useful in identifying trends in the market. Using this tool, you’ll be able to predict whether a trend is forming and invest accordingly. For example, any RSI above 50 is an upward trend while a downward trend would be below 50.
Parabolic SAR (Stop and Reversal)
Identifying the start of a trend is very useful because it somehow allows you to ride the way and come out with a good profit. However – how exactly do you find out when the wave is about to end? Parabolic SAR is the indicator that tells you when it’s time to cut back and exit before a trend stops completely. The beauty of this indicator is that it’s a one-glance decision machine. You sell when the dots are above the candle and you buy when they’re below. It’s that simple! Note though that this doesn’t work for markets with a sideways movement on the prices.
Bollinger Band
This one’s pretty interesting and makes good use of the ‘band’ principle. It’s a combination of complex and simple, but the entire idea is that the volatility of the market can be predicted using the contraction and expansion of a band. “Try checking a chart and identifying the different ‘waves’ that come with it, The Bollinger Band simply identifies that the smaller a contraction, the higher the jump of a price” an article on Admiralmarkets.ae quotes.
Your Forex platform provider won’t just give you indicators for no reason – so don’t hesitate to learn and use them. The ones provided here are pretty basic and you should be introduced to more indicators as you level up in Forex trading!